[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]

                       ECONOMIC STIMULUS PAYMENTS



                               before the

                       SUBCOMMITTEE ON OVERSIGHT

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION


                             JUNE 19, 2008


                           Serial No. 110-88


         Printed for the use of the Committee on Ways and Means

50-038                    WASHINGTON : 2009
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                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       JIM MCCRERY, Louisiana
SER M. LEVIN, Michigan               WALLY HERGER, California
JIM MCDERMOTT, Washington            DAVE CAMP, Michigan
JOHN LEWIS, Georgia                  JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts       SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York         PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee            JERRY WELLER, Illinois
XAVIER BECERRA, California           KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas                 RON LEWIS, Kentucky
EARL POMEROY, North Dakota           KEVIN BRADY, Texas
MIKE THOMPSON, California            THOMAS M. REYNOLDS, New York
JOHN B. LARSON, Connecticut          PAUL RYAN, Wisconsin
RAHM EMANUEL, Illinois               ERIC CANTOR, Virginia
EARL BLUMENAUER, Oregon              JOHN LINDER, Georgia
RON KIND, Wisconsin                  DEVIN NUNES, California
BILL PASCRELL, JR., New Jersey       PAT TIBERI, Ohio
SHELLEY BERKLEY, Nevada              JON PORTER, Nevada

               Janice Mays, Chief Counsel Staff Director

                   Jon Traub, Minority Staff Director


                       SUBCOMMITTEE ON OVERSIGHT

                     JOHN LEWIS, Georgia, Chairman

JOHN S. TANNER, Tennessee            JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts       ERIC CANTOR, Virginia
XAVIER BECERRA, California           JOHN LINDER, Georgia
RON KIND, Wisconsin                  DEVIN NUNES, California
BILL PASCRELL, JR., New Jersey       PAT TIBERI, Ohio

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S



Advisory of June 10, 2008, announcing the hearing................     2


Nina E. Olson, National Taxpayer Advocate, Internal Revenue 
  Service........................................................     7
Hon. Douglas H. Shulman, Commissioner of the Internal Revenue 
  Service........................................................    50
Linda McMahon, Social Security Administration Deputy Commissioner 
  for Operations.................................................    62

                       SUBMISSIONS FOR THE RECORD

AARP, statement..................................................    80
Morrison Affairs Public Group, statement.........................    89
National Council on Aging, Statement.............................    91
Paul Donnelly, Statement.........................................    92
Santa Barbara Bank & Trust, Statement............................    93
Hon. J. Russell George, Statement................................    96

                       ECONOMIC STIMULUS PAYMENTS


                        THURSDAY, JUNE 19, 2008

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                  Subcommittee on Oversight
                                                    Washington, DC.

    The Subcommittees met, pursuant to notice, at 10:04 a.m., 
in room 1100, Longworth House Office Building, Hon. John Lewis 
[Chairman of the Subcommittee on Oversight] presiding.
    [The advisory announcing the hearing follows:]



                       SUBCOMMITTEE ON OVERSIGHT

                                                CONTACT: (202) 225-5522
June 10, 2008

    Lewis and McNulty Announce a Joint Hearing on Economic Stimulus 

    House Ways and Means Oversight Subcommittee Chairman John Lewis (D-
GA) and Social Security Subcommittee Chairman Michael R. McNulty (D-NY) 
today announced that the Subcommittees will hold a joint hearing on the 
status of the economic stimulus payments. The hearing will take place 
on Thursday, June 19, 2008, at 10:00 a.m., in the main Committee 
hearing room, 1100 Longworth House Office Building.
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.


    On February 7, 2008, the Congress passed the ``Economic Stimulus 
Act of 2008,'' which was signed into law by the President on February 
13, 2008 (P.L. 110-185). This law provides lower-income and middle-
income working families, and certain seniors and disabled veterans, 
with an economic stimulus payment (commonly referred to as a ``rebate 
    The rebate check generally is equal to the lesser of a taxpayer's 
net income tax liability or $600 ($1,200 in the case of married couples 
filing a joint return). In the case of taxpayers with qualifying income 
(defined as earned income, Social Security benefits, disabled veteran 
benefits, and benefits for widows of disabled veterans) of at least 
$3,000 and taxpayers with positive income tax liability, the rebate 
check will not be less than $300 ($600 in the case of married couples 
filing a joint return). The amount of the rebate check is increased by 
$300 for each child under the age of 17. The rebate check phases out 
for high-income taxpayers.
    To receive a rebate check this year, eligible taxpayers must file 
an income tax return for the 2007 tax year by October 15, 2008. There 
are special filing requirements for taxpayers who normally are not 
required to file an income tax return (``ESP filers''). The Internal 
Revenue Service (``IRS'') estimates that 130 million economic stimulus 
payments will be sent to eligible taxpayers, including ESP filers. For 
returns filed by April 15th, economic stimulus payments that were 
direct deposited have been completed, and, by July 11th, the remaining 
checks are scheduled to be mailed. Through June 5, 2008, about 67 
million economic stimulus payments have been made.
    To administer the rebate checks, the IRS and the Social Security 
Administration (``SSA'') received an additional appropriation of $50.7 
million and $31 million, respectively, to ensure that the rebate checks 
are fully and properly paid. These funds have been used, in part, to 
educate, assist, and locate taxpayers eligible for the rebate checks.
    While the IRS and SSA reach out to taxpayers and beneficiaries to 
increase public awareness, they also must protect taxpayers from 
identity thieves who use fraudulent schemes and tax scams involving the 
rebate checks to obtain personal and financial information and claim 
someone else's rebate check. The Federal Trade Commission and the 
Internet Crime Complaint Center (``IC3'') report an increasing number 
of identity theft complaints referencing the economic stimulus 
payments. The IRS has issued warnings to taxpayers about rebate check 
scams and expects these scams to continue.
    ``Time is running out for millions of elderly and working Americans 
to file tax returns and receive a rebate check this year,'' said 
Oversight Subcommittee Chairman Lewis. ``Some problems have developed 
with the rebate checks, and it is preventing relief from getting to 
people who are struggling to keep up with rising costs. We must work 
quickly to address these problems and help ensure that the rebate 
checks reach everyone who is eligible.''
    Social Security Subcommittee Chairman McNulty said, ``Economic 
stimulus rebates must be delivered quickly and accurately to achieve 
their purpose of stimulating the economy. Earlier this year, Congress 
asked the Social Security Administration to help reach seniors and 
other beneficiaries who do not usually file tax forms so they could 
receive a check if eligible. We provided SSA with additional resources 
to perform this duty and this hearing presents an opportunity to 
determine whether SSA's and IRS's efforts were successful.''


    The Subcommittees will review the status of the economic stimulus 
payments. They will examine the number of returns received and 
processed, the number of rebate checks issued (direct deposit and 
paper), the amount of the rebate checks issued, the overall payment 
schedule of rebate checks, and outreach activities conducted by the IRS 
and the SSA to locate individuals eligible for the rebate checks. 
Further, the Subcommittees will examine problems experienced by 
individuals eligible for rebate checks and what can be done to address 
these problems.
    The Subcommittees also will examine the identity theft schemes 
developed to date and review actions taken in response. Finally, the 
Subcommittees will ask the agencies to examine how to protect Social 
Security beneficiaries and other individuals from identity theft 
schemes using rebate checks as a lure.


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noted above.


    Chairman LEWIS. Good morning, good morning. The hearing is 
now called to order. Today the Ways and Means Subcommittees on 
Oversight and Social Security will review the status of the 
rebate checks.
    People are suffering. I am really not sure how people are 
getting by. We are trying to get money into the hands of people 
who need it the most. But during that, we have placed a huge 
strain on the resources of the IRS. We have not been successful 
at reaching all of the people who are entitled to this tax 
    As Chairman of the Subcommittee on Oversight, I know that 
it has been hard for the Internal Revenue Service to take on 
the rebate checks during the tax filing season. There are 
almost 20 million additional taxpayers. Calls to the IRS have 
doubled this filing season, with over 10 million calls in 1 
week, and 70 million calls to date. The Service has mailed over 
200 million notices to taxpayers on the rebate checks, alone.
    I am concerned that the strain on its workers, its budget, 
collection, and taxpayer services will be felt for the next 
filing season. The Administration needs to tell the Congress 
what resources the IRS needs. In addition to the burden on the 
IRS, we know that millions of elderly and working people have 
not yet filed for a rebate check. People suffering under the 
pressure of rising food and gas prices, we know people need 
this relief, and they need it now.
    Clearly, millions of people do not know that they are 
eligible. We look forward to learning how--the Agency's plan to 
reach these people. We want to know, learn how the Congress, 
the Administration, and the public, and the private sector can 
work together to put billions of dollars in the pockets of 
Americans who need it most.
    Now I am pleased to recognize the distinguished Ranking 
Member of the Subcommittee on Oversight, my dear friend Mr. 
Ramstad, for his opening statement.
    Mr. RAMSTAD. Thank you, Mr. Chairman, and you are a dear 
friend. I appreciate your yielding, and I thank both you and 
Chairman McNulty for holding this hearing today.
    The Economic Stimulus Act that we passed in February is an 
example of how both parties and Congress and the White House 
can work together in a bipartisan, pragmatic, and common-sense 
way when urgent action is needed. There is already some 
evidence that the stimulus has helped the economy. Although the 
checks didn't go out until the end of April, retail spending 
has already increased significantly; more than 76 million 
payments, totaling $64 trillion have already been sent, with 
more to come.
    However, none of this--I think that's $64 billion, it 
should read; sorry, I still love my staff--most people probably 
don't fully realize the unanticipated additional workload that 
this created for the IRS. I think all of us owe the Service a 
debt of gratitude.
    Certainly, the Service faced many challenges, other than 
getting the stimulus checks out. During this previous--this 
recently completed--filing season, there was the late passage 
of the AMT patch that required, I know, reprogramming the 
systems and printing new forms. I know a lot of IRS employees, 
and I know a lot of them worked overtime to minimize the 
disruption that late enactment of the AMT caused. So, blame 
Congress, not the IRS, for that one.
    But once the filing season started, the IRS began 
processing the 2007 returns, we asked the IRS, really, to 
perform double duty to expedite our stimulus plan. I think the 
Service responded very, very well.
    Also, I know the--part of the staff was diverted from 
reading the newspapers, from collections enforcement. There 
will be a price to pay in terms of foregone revenue, I guess, 
to the tune of $565 million, according to IRS estimates. I am 
looking forward to hearing more of that today from the 
    So, I hope we can learn in this hearing if the Service has 
sufficient resources for taxpayer services, because obviously 
that's important. I am glad to see Ms. Olson here, the taxpayer 
advocate who does such a great job on behalf of taxpayers.
    We want taxpayers to have the best service possible, but we 
don't want to sacrifice other primary IRS responsibilities, as 
well. So, I also hope this hearing will shed light on what can 
be done to prevent scam artists from preying on taxpayers, 
especially the elderly. I am very concerned about that. We have 
seen ruses from scam artists that have victimized many, many 
people, again, especially elderly, surrounding previous 
stimulus payments. I hope that's avoided as much as possible 
this time around.
    So, I look forward to the testimony today, Mr. Chairman, 
about the administration of stimulus payments. It's a very 
massive job, it's a very important job, and it's good to know 
the IRS has many dedicated public servants that were able to 
perform under pressure.
    So, thank you again, Mr. Chairman, for holding this 
hearing. I yield back.
    Chairman LEWIS. Thank you, Mr. Ramstad. Now I am pleased to 
recognize the Chairman of the Subcommittee on Social Security, 
Mr. McNulty, for his opening statement.
    Mr. MCNULTY. Thank you, Chairman LEWIS. Thank you for your 
22 years of outstanding service in the U.S. Congress, and for 
your decades of leadership in the civil rights movement, having 
put your life on the line on numerous occasions to provide 
civil rights and equal rights for all Americans.
    I am grateful to you for organizing today's joint hearing 
on the implementation of the Economic Stimulus Act of 2008. The 
impetus for this legislation was the downturn in the economy, 
which continues to lag. In order to work, the stimulus had to 
be delivered quickly.
    Of course, some things are much easier said than done. But 
I have been impressed by the rapid response of the agencies 
tasked with the job of getting payments out as quickly and as 
effectively as possible. A mere 55 working days passed between 
the time that the President signed the legislation and the 
first stimulus payment was delivered. This was during the busy 
tax filing season.
    The Social Security Administration assisted by providing 
information to IRS, so it could reach out to Social Security 
and Veterans Administration beneficiaries who did not normally 
need to file, but would have to do so in order to qualify for 
their payment. These individuals received detailed materials 
from the IRS on the steps they needed to take in order to 
receive the stimulus payment. These processes are much more 
complicated than they appear on the surface, and the agencies 
have much to be proud of in the work they have done so far.
    Inevitably, the stimulus program caused individuals to 
contact IRS and SSA with questions, and to seek help with 
filing the proper paperwork. IRS received the bulk of the 
inquiries. SSA also saw an increase in contacts.
    In accord with congressional intent, and the Agency's 
primary role as the administrator of the Social Security 
system, SSA directed these individuals to the IRS for more 
information. The private sector and non-governmental 
organizations are also doing their part to help, as businesses, 
senior citizens groups, and others have assisted with publicity 
and tax filing for the stimulus.
    Today, I hope to learn more about how successful these 
efforts have been. I understand that there may be a significant 
number of seniors and veterans who are eligible for a stimulus 
payment, but have yet to file the necessary tax returns in 
order to receive it. There are some concerns about whether 
there has been a sufficient outreach to this population, and I 
expect to gain a better understanding of how this might be 
    I would hope and expect that any proposals for additional 
outreach would not draw SSA staff away from their principal 
duties administering Social Security, or generate new workloads 
for the Agency. Commissioner Astrue and I spoke last Friday, 
and I know he shares these concerns.
    As we consider the options, I will advise my colleagues 
that we should remain ever mindful that SSA is already 
struggling to meet its current workloads, given a decade of 
under-funding, and an unprecedented backlog of unprocessed 
disability claims, and an impending spike of retirement claims 
from the baby boom generation. I expect that timely payment of 
Social Security benefits for seniors, people with disabilities, 
and survivors also would be of great benefit to the economy. I 
look forward to the testimony, and once again, thank the 
Chairman and the Ranking Members.
    Chairman LEWIS. Thank you, Mr. McNulty for your statement. 
You didn't have to say it, but thank you.
    Now I am pleased to recognize the Ranking Member of the 
Subcommittee on Social Security, Mr. Johnson, for his opening 
    Mr. JOHNSON. Thank you, Mr. Chairman. Chairmen Lewis and 
McNulty both, I want to thank you for holding this hearing 
today. McNulty has spoken very eloquently about the shortfalls 
in the Social Security Administration, and how we keep putting 
extra loads on them all the time without funding.
    But in order to give a needed boost to our National 
economy, the Congress passed, the President signed into law 
legislation estimated to provide more than 100 billion to 130 
million people--and that number is right, by the way.
    It's important that the Congress know whether this massive 
undertaking by the Internal Revenue Service will help--with 
help from the Social Security Administration is being done 
    Congress gave the agencies almost $300 million to cover the 
cost of processing the rebate checks. We need to know whether 
this money was spent wisely or not. Included in the cost of 
administering the stimulus program was education and outreach 
to those eligible, including those receiving Social Security 
    I look forward to hearing the testimony today by the Social 
Security Administration, as they discuss their work with the 
IRS in targeting and reaching these beneficiaries. All signs 
suggest that the IRS and Social Security have performed very 
well in carrying out this massive and difficult task, while 
under immense pressure. Both agencies and their staffs are to 
be commended for their professionalism and dedication to 
getting the job done right.
    Letting Americans keep more of their own money is always a 
good thing. During tight economic times and high gas prices, 
it's even more important. I thank the witnesses for their 
upcoming testimony, and I thank you again, Chairman Lewis and 
Chairman McNulty, for holding this important hearing.
    Chairman LEWIS. Thank you very much, Mr. Johnson, for your 
statement. Now we will hear from witnesses. I ask that you 
limit your testimony to 5 minutes. Without objection, your 
entire statement will be included in the record.
    It is now my pleasure to introduce the national taxpayer 
advocate, Nina Olson.

                    INTERNAL REVENUE SERVICE

    Ms. OLSON. Thank you, Mr. Chairman, Ranking Members, and 
distinguished Members of the Subcommittees. Thank you for 
inviting me to testify today regarding the status of economic 
stimulus payments. I would like to make five main points from 
my perspective as the national taxpayer advocate, the statutory 
voice for taxpayers and taxpayer rights.
    First, I would like to acknowledge the extraordinary job 
the IRS has done in delivering these stimulus payments. The 
Economic Stimulus Act was signed into law on February 13th, 4 
weeks after the filing season began, and while the IRS was 
still grappling with programming changes occasioned by numerous 
tax law changes enacted in December.
    The delivery of stimulus payments was a massive 
undertaking, in some ways akin to running a second filing 
season. The IRS has managed both to deliver a successful filing 
season, and to develop and implement plans to make stimulus 
payments to an estimated 130 million taxpayers in a remarkably 
short period of time.
    Second, in light of its limited resources, the IRS was not 
able to staff its telephone lines adequately, and had to make 
certain tradeoffs. The IRS has received 135 million telephone 
calls so far this year, more than twice the number of calls it 
received at this point in 2007. Not surprisingly, the level of 
service on the toll free lines overall has dropped from 80.6 
percent in 2007 to 62.8 percent this year, and to 42.9 percent 
during the recent week ending June 7th.
    The level of service on the telephone line dedicated to 
answering questions about stimulus payments has been even 
lower; 47.7 percent this year and 30.4 percent during the week 
ending June 7th. Only 1 out of every 10 callers to the stimulus 
line has spoken to a live human being. The IRS, understandably, 
transferred some employees from its accounts management and 
automated collection system functions to help in answering the 
onslaught of telephone calls. But, as a result, the inventory 
of individual taxpayer correspondence relating to account 
adjustments has more than doubled.
    These declines in the level of service are not mere 
statistics. They have a real negative impact on taxpayers, 
increasing their compliance burden. For example, a taxpayer who 
cannot get through to the IRS to negotiate an installment 
agreement may instead find his paycheck levied unnecessarily. A 
taxpayer whose audit document submissions are not properly 
processed may end up petitioning the tax court at significantly 
greater taxpayer and government expense.
    Third, a few glitches in taxpayer frustrations have arisen. 
One glitch was the Social Security numbers of approximately 
1,500 taxpayers were inadvertently disclosed when the IRS 
routed stimulus payments to the wrong bank accounts.
    Although not caused by IRS error, one source of frustration 
was that more than 20 million taxpayers who purchased refund 
anticipation loans, or refund anticipation checks, found that 
they were ineligible to receive their stimulus payments quickly 
via direct deposit, and instead were required to wait up to 
two-and-a-half months longer to receive paper checks.
    Local taxpayer advocates report taxpayer frustration in 
their not being able to obtain expedited stimulus payments, or 
overrides of tax offsets in economic hardship situations.
    Fourth, the IRS and taxpayer advocate service are 
conducting considerable outreach to senior citizens and other 
taxpayers without a 2006 tax filing requirement to encourage 
them to file forms 1040A to claim their stimulus payments. But 
there are significant barriers that will result in 
substantially less than full participation by this target 
    In addition to the fundamental complexity of the program, 
challenges include: the fact that some of these individuals may 
view filing a return as requiring too much effort for $300; 
that this population may lack Internet access of skills; or it 
may lack the mobility necessary to obtain assistance in 
applying for the ESP. Members of this population may be 
incapacitated, and under the care of guardians, conservators, 
nursing homes, and hospitals. Individuals who have not had 
contact with the IRS for years may be unwilling to open that 
conversation again.
    Fifth, there are several long-term lessons that can be 
learned from this experience. The complexity of the ESP 
eligibility and computation rules has created taxpayer 
confusion, and caused unnecessary work for the IRS. If Congress 
decides to enact another ESP, it should consider how to 
simplify the eligibility rules so that they lend themselves to 
easy communication. Such simplification may mean that some 
individuals receive more or less than they might under the 
current ESP, but that tradeoff in clarity will be well worth 
    Another lesson is that when an initiative targets a 
population that does not otherwise have contact with the IRS, 
it may be better to utilize another Federal agency for payment 
delivery. Why not find a way to let SSA and the VA make 
stimulus payments to beneficiaries without a tax filing 
requirement, instead of requiring these individuals to file 
ESP-only returns, and having the IRS send them paper checks.
    Alternatively, the IRS and other Federal agencies could 
determine eligibility based on available information, and the 
IRS could utilize no-fee debit cards for delivery of stimulus 
payments. Thank you, Mr. Chairman.
    [The prepared statement of Ms. Olson follows:]
   Statement of Nina E. Olson, National Taxpayer Advocate, Internal 
                            Revenue Service
    Chairmen Lewis and McNulty, Ranking Members Ramstad and Johnson, 
and distinguished Members of the Subcommittees:
    Thank you for inviting me to testify today regarding the status of 
economic stimulus payments authorized by the Economic Stimulus Act of 
    \1\ The views expressed herein are solely those of the National 
Taxpayer Advocate. The National Taxpayer Advocate is appointed by the 
Secretary of the Treasury and reports to the Commissioner of Internal 
Revenue. However, the National Taxpayer Advocate presents an 
independent taxpayer perspective that does not necessarily reflect the 
position of the IRS, the Treasury Department, or the Office of 
Management and Budget. Congressional testimony requested from the 
National Taxpayer Advocate is not submitted to the IRS, the Treasury 
Department, or the Office of Management and Budget for prior approval. 
However, we have provided courtesy copies of this statement to both the 
IRS and the Treasury Department in advance of this hearing.
    In my testimony, I will make five main points:

    1.  While the IRS was a logical agency to administer the bulk of 
the stimulus program, the timing of the statutory directive in February 
to begin to develop and implement the program essentially required the 
IRS to run two filing seasons simultaneously. In light of its limited 
resources, I believe the IRS on balance has done an outstanding job of 
administering both the 2008 filing season and the Economic Stimulus 
    \2\ Economic Stimulus Act, Pub. L. No. 110-185 (2008).
    2.  In light of its limited resources, the IRS was not able to 
staff its telephone lines adequately and had to make certain tradeoffs. 
IRS-wide, the level of service (LOS) on the toll-free telephone lines 
has dropped from 80.6 percent in 2007 to 62.8 percent year to date 
(YTD) and to 42.9 percent during the week ending June 7.\3\ The LOS on 
the telephone line dedicated to answering questions about stimulus 
payments has been even lower--47.7 percent YTD and 30.4 percent during 
the week ending June 7,\4\ and only one out of every ten callers to the 
stimulus line has spoken with a customer service representative.\5\ The 
IRS understandably transferred some employees from its Accounts 
Management and Automated Collection System functions to help in 
answering the onslaught of telephone calls. As a result, however, the 
inventory of individual taxpayer correspondence relating to account 
adjustments has more than doubled, creating potentially significant 
burdens for affected taxpayers. The need to assign IRS personnel to 
work on the stimulus program has caused core work to be placed on the 
back burner in other areas as well.
    \3\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Enterprise Snapshot (week ending June 7, 2008).
    \4\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus 
Payments) 866-234-2942 (week ending June 7, 2008).
    \5\ As of June 7, the IRS had received 27.7 million ``dialed number 
attempts'' on its toll-free telephone lines concerning economic 
stimulus payments. IRS Response to TAS Information Request (June 16, 
2008). The number of ``dialed number attempts'' that resulted in a 
conversation with a live assister was 2.9 million. Internal Revenue 
Service, Joint Operations Center, Snapshot Reports: Product Line 
Detail: Rebate Hotline (Economic Stimulus Payments) 866-234-2942 (week 
ending June 7, 2008). About 16.8 million additional callers were 
assisted through automation. In general, the IRS Joint Operations 
Center tracks the IRS's performance on its toll-free lines based on 
``net [call] attempts'' rather than ``dialed number attempts.'' While 
``net attempts'' understates the number of calls placed to the IRS, 
this testimony elsewhere cites ``net attempts'' because that data point 
is more accessible and can be used to identify trends.
    3.  A few glitches and taxpayer frustrations have arisen in the 
course of the IRS's administration of the economic stimulus payment 
(ESP) program. One glitch was that the Social Security numbers of 
approximately 1,500 taxpayers were inadvertently disclosed when the IRS 
routed stimulus payments to the wrong bank accounts. Although not 
caused by IRS error, one source of frustration was that more than 20 
million taxpayers who purchased refund anticipation loans (RALs) or 
refund anticipation checks (RACs) found that they were ineligible to 
receive their stimulus payments quickly via direct deposit and instead 
were required to wait up to 2-1/2 months longer to receive paper 
    4.  The IRS is conducting considerable outreach to senior citizens 
and other taxpayers without a tax filing requirement to encourage them 
to file Forms 1040A to claim their stimulus payments, but there are 
significant barriers that will result in substantially less than full 
participation by this target population.
    5.  There are several long-term lessons the IRS can learn from this 
undertaking that may improve its effectiveness in the future. In 
particular, the IRS should explore the development of a cadre of 
information technology and operations analysts dedicated to initiatives 
such as this, so that resources are not continually diverted from IRS 
core functions or improvement projects when special needs arise, as 
they often do.

    I will address these issues from my perspective as the National 
Taxpayer Advocate, the statutory voice for taxpayers and taxpayer 
rights. I understand that the Treasury Inspector General for Tax 
Administration and the Government Accountability Office are conducting 
operational reviews of the ESP administration, and they will provide an 
assessment at a later date.
I. The IRS on Balance Has Done an Outstanding Job of Administering the 
        Economic Stimulus Act.
    Congress passed the Economic Stimulus Act in February in light of 
deep concerns about the health of the U.S. economy. The goal of the 
legislation was to stimulate the economy by placing an estimated $152 
billion into the hands of consumers and businesses.\6\ Technically, the 
legislation provides individual taxpayers with a credit against their 
2008 tax liabilities, and taxpayers ordinarily would claim the credit 
when they file their 2008 tax returns during the 2009 filing season. 
Because Congress wanted to provide economic stimulus more quickly, 
however, it directed the IRS to make payments as an advance against the 
credit ``as rapidly as possible.'' \7\
    \6\ See, e.g., The White House, Fact Sheet: Bipartisan Growth 
Package Will Help Protect Our Nation's Economic Health (Feb. 13, 2008).
    \7\ IRC Sec. 6428(g)(3).
    The IRS, which already was overextended trying to cope with an 
unusually challenging filing season, has managed both to deliver a 
successful filing season and to develop and implement plans to make 
stimulus payments to an estimated 130 million taxpayers in a remarkably 
short period of time. Because eligibility for a stimulus payment was 
dependent on a taxpayer's 2007 income tax return filed during the 2008 
filing season, the IRS could not reasonably process stimulus payments 
until after the regular April 15 filing deadline. On April 28--less 
than two weeks after the regular filing deadline--the IRS began 
transmitting stimulus payments, and by May, the stimulus payments were 
widely credited with increasing consumer spending.\8\
    \8\ See Kelly Evans, Stimulus Checks Aid Retail Sales, Wall Street 
Journal, June 13, 2008, at A3 (noting that an unexpectedly sharp 
increase in retail sales during May suggests that ``consumers spent a 
chunk of their government economic-stimulus checks'' and quoting one 
economist as saying that the stimulus payments would act like a ``shot 
of caffeine''); Michael M. Grynbaum, Retail Sales Rise Above Forecasts, 
N.Y. Times, June 13, 2008, at C1 (quoting an economist as saying: ``The 
sharp improvement in May was clearly driven by receipt of the first 
wave of tax rebate payments. These payments will continue to be a 
positive factor for the consumer in the next couple of months.''); 
Martin Crutsinger, Retail Sales Rise Unexpectedly in May, Washington 
Post, June 13, 2008, at D4 (noting that the increase in retail sales 
``signaled that Americans are spending their rebate payments'').
    The delivery of stimulus payments was a massive undertaking--in 
some ways akin to running a second filing season. Among other things:

      The IRS quickly developed programming code so that it 
could use the information reported on 2007 tax returns to determine 
which taxpayers were eligible for stimulus payments and how much they 
were entitled to receive.\9\
    \9\ The programming challenges have been continuing. For example, 
the Economic Stimulus Act provides that no credit will be allowed if 
any person listed on a tax return (i.e., the taxpayer, spouse, or any 
qualifying child) does not have a valid Social Security Number. IRC 
Sec. 6428(h). The IRS had to do programming to implement that 
restriction. On June 17, however, the President signed into law H.R. 
6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act, which 
allows members of the military to receive stimulus payments even where 
the member's spouse does not have an SSN. The IRS is having to do 
additional work to identify these taxpayers and ensure that they 
receive stimulus payments.
      The IRS developed a way to issue stimulus payments to 
taxpayers with no taxable income who filed their returns 
electronically. The Economic Stimulus Act provided that individuals 
with at least $3,000 of ``qualifying income,'' notably Social Security 
benefits, would be eligible for stimulus payments even if they had no 
taxable income. However, the Act required all individuals to file tax 
returns to receive stimulus payments. Returns filed by individuals who 
have no tax-filing requirement and are seeking solely to claim their 
stimulus payments are referred to as ``ESP-only'' returns.

    In planning to process ESP-only returns, the IRS discovered a 
significant systems limitation. Returns filed electronically must 
include at least $1.00 of adjusted gross income (AGI) to be processed, 
but many Social Security recipients have no AGI. As a workaround, the 
IRS determined that it could process a return if a taxpayer lists $1.00 
of AGI, but if a taxpayer with no AGI were to list AGI of $1.00, the 
taxpayer technically would be furnishing inaccurate information; 
taxpayers are required to sign a tax return under penalties of perjury 
and declare that, to the best of their knowledge and belief, all 
information on the return is ``true, correct, and complete.'' To 
resolve this conundrum, the Department of the Treasury and the IRS 
quickly issued guidance advising that taxpayers could list $1.00 of AGI 
without violating the penalties of perjury statement for the purpose of 
claiming stimulus payments.\10\
    \10\ Rev. Proc. 2008-21, 2008-12 I.R.B. 657.

      The IRS posted extensive information on its website, 
including straightforward Frequently Asked Questions (FAQs) and sub-
pages tailored for five populations--Social Security recipients, 
Veterans Affairs recipients, Railroad Retirement recipients, low-wage 
workers, and military combat personnel.\11\ As of June 11, individuals 
had made 55.6 million visits to the ESP portion of the IRS website and 
viewed 91.0 million pages (excluding use of the stimulus calculator 
described below).\12\
    \11\ See Economic Stimulus Payments Information Center at 
    \12\ IRS Economic Stimulus Activity Report (June 17, 2008).
      The IRS mailed notices to more than 130 million taxpayers 
who filed 2006 tax returns to remind them that they would have to file 
2007 returns to claim their stimulus payments.\13\
    \13\ See IRS Notice 1377.
      The IRS mailed information packages to 20.5 million 
recipients of Social Security or Veterans benefits who did not file 
2006 tax returns to provide them with information on how to claim their 
stimulus payments.\14\
    \14\ See IRS Package 1040A-3.
      The IRS developed a stimulus calculator for its website 
so that taxpayers could quickly determine whether they qualify for a 
stimulus payment and, if so, estimate the amount. As of June 11, 
individuals had made 23.8 million visits to the website and viewed 
150.6 million pages.\15\
    \15\ IRS Economic Stimulus Activity Report (June 17, 2008).
      The IRS worked with the Free File Alliance to ensure that 
taxpayers who did not have a tax filing requirement but wanted to file 
ESP-only returns through e-file could do so without charge.\16\
    \16\ Not all members of the Free File Alliance offered this 
service. To date, approximately 7.7 million ESP-only returns have been 
filed, and only 708,169 have been e-filed. Thus, about nine out of ten 
taxpayers filing ESP-only returns filed on paper. IRS Economic Stimulus 
Activity Report (June 17, 2008).
      The IRS transferred personnel from other functions to 
help answer the barrage of telephone calls it received. As of June 7, 
the IRS had received 26.7 million ``net call attempts'' related to 
stimulus payments.\17\ Many calls could be addressed by automated 
responses and many calls did not get through, but assisters spoke with 
about 2.9 million taxpayers directly to respond to stimulus 
    \17\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus 
Payments) 866-234-2942 (week ending June 7, 2008).
    \18\ Id.
      The IRS developed outreach initiatives and is continuing 
to reach out to senior citizens and other taxpayers without a filing 
requirement to encourage them to file ESP-only returns. As of June 14, 
7.7 million such returns had been received.\19\
    \19\ IRS Economic Stimulus Activity Report (June 6, 2008).
      The IRS organized a major ``Super Saturday'' event on 
March 29 to assist taxpayers in preparing ESP-only returns. IRS 
employees and IRS partners staffed some 700 walk-in sites, and IRS 
employees staffed the toll-free telephone line.\20\
    \20\ IRS Wage & Investment Division, IRS puts its best face forward 
on Super Saturday, Insider (available at http://win.web.irs.gov/
articles/2008/Super_Saturday.htm (last visited June 8, 2008)).

    By the end of last week, the IRS had paid out about $63.9 billion 
to 76.5 million households.\21\ The IRS projects that it will have paid 
out a total of $99 billion by the end of 2008 and somewhat more during 
the 2009 filing season.\22\
    \21\ Department of the Treasury News Release, Week 7 Wrap-Up: 
Treasury Sent 9.526 Million Stimulus Payments This Week (June 13, 
    \22\ IRS Response to TAS Information Request (June 12, 2008).
    Overall, this is an extraordinary success story. While the 
administration of the program has not been free from tradeoffs and 
occasional hitches, some of which I will discuss below, it is a 
testament to the IRS's leadership and its talented and dedicated 
employees that it has been able to deliver the filing season and the 
stimulus program so effectively with so little time to prepare.
II. The IRS Has Had to Make Certain Tradeoffs to Administer the 
    In passing the Economic Stimulus Act, Congress gave the IRS a 
supplemental appropriation of $202.1 million to administer the issuance 
of stimulus payments.\23\ While the funding is certainly helpful, the 
IRS's principal challenge was the lack of time to plan. In addition to 
all the programming and outreach the IRS has had to do, the IRS also 
has received more than 26 million telephone calls and 316,000 visits to 
its walk-in sites relating solely to stimulus payments.\24\
    \23\ Economic Stimulus Act, Pub. L. No. 110-185, 
Sec. 101(e)(1)(A)(ii)(2008). Through June 5, the IRS had obligated 
$138.2 million ($121.7 million in Operations Support and $16.5 million 
in Taxpayer Services), but this total does not include labor charges 
from the preceding 2-4 weeks. IRS Response to TAS Information Request 
(June 123, 2008). The IRS anticipates it may require additional 
resources due to higher than expected call volumes. Id.
    \24\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus 
Payments) 866-234-2942 (week ending June 7, 2008); IRS Economic 
Stimulus Activity Report (June 17, 2008).
    Even with supplemental funding, there was not enough time for the 
IRS to hire, train, and deploy additional employees to answer the 
phones or staff the walk-in sites. The IRS therefore faced some 
difficult decisions. On the one hand, if it did not reassign employees 
from other functions to assist in answering the large spike in 
telephone calls, the LOS on the toll-free telephone lines would have 
declined by even more than it has. On the other hand, if the IRS did 
reassign employees from other functions, the core work those employees 
ordinarily perform would suffer. Inevitably, there was both a decline 
in the level of taxpayer service the IRS provides, particularly on its 
toll-free telephone lines, and a modest reduction in its enforcement 
A. The IRS Has Been Unable to Keep Up with the Large Volume of 
        Telephone Calls and Correspondence It Has Received.
    The IRS has received 94.4 million enterprise-wide ``net call 
attempts'' YTD (through June7, 2008) as compared with 51.6 million 
``net call attempts'' for the same period in2007.\25\ That reflects an 
enormous 83 percent increase. In percentage terms, the largest 
increases have occurred since the regular April 15 filing deadline. In 
the week ending June7, for example, the IRS received 6.2 million call 
attempts compared with 1.6 million call attempts during the comparable 
week in2007--an increase of 279 percent.\26\
    \25\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Enterprise Snapshot (week ending June 7, 2008). As noted in a 
prior footnote, the term ``net call attempts'' reflects official data 
that the IRS posts on its Joint Operations Center website to track the 
activity on its toll-free lines, but it is a term of art that generally 
understates the number of calls that taxpayers place in an attempt to 
reach the IRS. The IRS separately tracks ``dialed number attempts,'' a 
measure that reflects the number of times taxpayers have dialed the 
toll-free number and provides a more accurate measurement of what 
taxpayers experience. The IRS reports that it has received 135 million 
dialed number attempts in 2008 YTD (through June 7). IRS Response to 
TAS Information Request (June 16, 2008). On May 9, the peak day so far 
this year, the IRS received 4.7 million dialed number attempts.
    \26\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Enterprise Snapshot (week ending June 7, 2008).
    Despite the reassignment of employees from other functions and 
despite the IRS's decision to extend the employment of temporary staff 
hired for the filing season, the IRS has been unable to keep up with 
the volume of calls. The enterprise-wide level of service (LOS) in 2008 
stands at 62.8 percent YTD (through June 7) as compared with 80.6 
percent in 2007 for the comparable period.\27\ In the week ending June 
7, the LOS stood at 42.9 percent--down from 76.8 percent in the 
comparable week last year.\28\ Focusing solely on the 3.0 million calls 
to the Economic Stimulus Hotline during this recent week, the LOS was 
30.4 percent.\29\
    \27\ Id. The customer service representative (CSR) LOS measures the 
relative success rate of taxpayers that call for toll-free services 
seeking assistance from CSRs. Generally speaking, the CSR LOS is 
calculated by dividing the number of calls answered by CSRs by the 
total call attempts of callers attempting to reach the CSR queue. 
(Essentially, CSR LOS measures the percentage of customers who want to 
reach a CSR and who are successful.) Total call attempts is the sum of 
calls answered, calls abandoned by the caller, and calls that receive a 
busy signal. For more detail, see CAS Data Dictionary--FY 2008, at 
    \28\ Id.
    \29\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus 
Payments) 866-234-2942 (week ending June 7, 2008).
    During some weeks, the volume of calls has been overwhelming. In 
mid May, the IRS enterprise-wide received particularly high call 
volumes--9.5 million calls during the week ending May 10 (LOS = 34.3 
percent) and 11.2 million calls during the week ending May17 (LOS= 34.8 
percent).\30\ During the week of May 17, 6.6 million of the calls the 
IRS received related to stimulus rebates, and the LOS on that line fell 
to 26.3 percent.\31\
    \30\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Enterprise Snapshot (weeks ending May 10, 2008 and May 17, 
    \31\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus 
Payments) 866-234-2942 (week ending May 17, 2008).
    As described in footnote 27, the LOS generally measures the 
treatment of taxpayers that seek to speak with a customer service 
representative (CSR). However, the following chart shows the 
disposition of all taxpayer calls, including total number of calls 
received, the number and percentage of calls answered by a CSR, the 
number and percentage of calls answered by automation, and the 
percentage of calls not answered: \32\
    \32\ This chart is compiled from IRS Joint Operations Center data. 
Data for 2008 is YTD through June 7, 2008or for the week ending June 7, 
2008. Data for 2007 is YTD through June 9, 2007or for the week ending 
June 9, 2007. Some unassisted calls result when taxpayers hang up for a 
variety of reasons. Therefore, it is not the case that the unassisted 
percentage is entirely attributable to IRS limitations.
                                                                                                     Assister                    Automation
                                                                  Dialed Number       Assister       Answered     Automation      Assisted    Unassisted
                                                                     Attempts         Answered      Percentage     Assisted      Percentage   Percentage
Enterprise 2008 YTD                                                 134,656,185       28,829,133        21.4%      29,598,595        22.0%        56.6%
Enterprise 2007 YTD                                                  62,479,800       24,677,171        39.5%      13,379,589        21.4%        39.1%
ESP Hotline YTD                                                      27,731,306        2,866,113        10.3%      16,798,968        60.6%        29.1%
Enterprise 2008 Weekly                                                8,657,146        1,193,032       13.8 %       2,099,177        24.2%        62.0%
Enterprise 2007 Weekly                                                2,442,566          898,378        36.8%         187,597         7.7%        55.5%
ESP Hotline Weekly                                                    3,304,474          205,572         6.2%       1,770,631        53.6%        40.2%

    As this chart indicates, the percentage of calls that the IRS 
successfully addressed has fallen from 60.9 percent in 2007 to 43.4 
percent in 2008 and the percentage of taxpayers assisted by a CSR has 
declined from 39.5 percent to 21.4 percent. These reductions are 
    To assist with these call volumes, the IRS is relying on some 
employees from its Account Management and Automated Collection System 
(ACS) functions.
    In Accounts Management, customer service representatives (CSRs) who 
work on account adjustments (including taxpayer correspondence, amended 
returns, responses to math error notices, and injured spouse claims) 
often shift between paper correspondence and assisting with the phones 
as needed. As the IRS has been forced to shift employees to help in 
answering the phones, the productivity of Accounts Management in 
processing taxpayer correspondence relating to adjustments has 
declined. As of June 7, 2008, the inventory of adjustments 
correspondence involving individual taxpayers stood at 647,674, as 
compared with 320,239 on the corresponding date in 2007--an increase of 
102 percent.\33\ Of greater concern, the number of ``uncontrolled'' 
items of such correspondence stood at 22,156, as compared with 10,483 
last year--an increase of 111 percent.\34\
    \33\ Internal Revenue Service, Joint Operations Center, Customer 
Account Services Accounts Management Paper Inventory Reports: Weekly 
Enterprise Adjustments Inventory (weeks ending June 7, 2008 and June 9, 
    \34\ Id.
    ACS is the IRS's automated collection system, and taxpayers who 
receive collection notices often seek to call the IRS to resolve 
problems before enforced collection action is taken. For that reason, 
it is critical that these taxpayers have an opportunity to get through 
to an IRS collection employee.
    The need to staff the stimulus lines has led to a decline in the 
LOS on the ACS telephone lines.\35\ The declines have been relatively 
modest YTD but have become more pronounced recently as stimulus calls 
have remained at high levels. The LOS on the ACS lines maintained by 
the Wage & Investment Division stands at 75.3 percent YTD and 60.9 
percent for the week ending June 7 (as compared with 78.7 percent and 
88.5 percent for the same periods in 2007).\36\ The LOS on the ACS 
lines maintained by the Small Business/Self-Employed Division stands at 
75.6 percent YTD and 71.6 percent for the week ending June 7 (as 
compared with 81.8 percent and 86.1 percent for the same periods in 
    \35\ There are 2,872 full-time equivalent employees (FTE) in the 
ACS function (1,545 in the Wage & Investment Division and 1,327 in the 
Small Business/Self-Employed Division). Through May, the IRS had 
shifted 116 FTE to answer ESP telephone calls and projects that it will 
shift another 80.1 FTE in June and July. IRS Response to TAS 
Information Request (June 13, 2008).
    \36\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Product Line Detail: W&I ACS 800-829-7650 (week ending June 7, 
    \37\ Internal Revenue Service, Joint Operations Center, Snapshot 
Reports: Product Line Detail: SB/SE ACS 800-829-3903 (week ending June 
7, 2008).
    The IRS projects that it will receive an additional 6.6 million 
stimulus-related calls from June through September.\38\ Because the IRS 
received 3.0 million calls during the first week of June alone, that 
projection may need to be reevaluated.
    \38\ IRS Response to TAS Information Request (June 13, 2008).
B. The Reduction in Level of Service on the Phones and Delays in 
        Processing Correspondence Can Harm Taxpayers and Potentially 
        Erode Compliance
    While I understand that the overriding goal of the stimulus 
legislation was to put money into the hands of U.S. households as 
quickly as possible and the IRS was a logical agency to administer the 
program, I am concerned by the sharp reduction in the IRS's ability to 
answer calls from taxpayers and timely process taxpayer correspondence.
    The declines in the level of service on both the Accounts 
Management and the ACS telephone lines and the increasing inventories 
of unaddressed correspondence and other submissions are not mere 
statistics. These declines have real, negative impact on taxpayers, 
increasing their compliance burden. For example, a taxpayer who cannot 
get through to the IRS to negotiate an installment agreement may 
instead find his paycheck levied--unnecessarily. A taxpayer who is 
under audit and submits documentation may receive a statutory notice of 
deficiency because the IRS did not process the correspondence or 
amended returns timely. Thus, the taxpayer will incur additional 
expense and burden by having to file a petition with the United States 
Tax Court or request an audit reconsideration.
    From a broader policy perspective, maintaining a high level of 
taxpayer service is crucial to tax administration. First, it is a basic 
obligation of the government. If we are requiring taxpayers to pay a 
large percentage of their incomes to the government, the least we can 
do is make it as easy as possible for taxpayers to comply. When 
taxpayers cannot get through to the IRS, they get frustrated, and the 
experience leaves them with a negative impression of their government. 
Moreover, when a taxpayer is facing enforcement action and either 
believes the action is unwarranted or wishes to talk with an IRS 
employee to try to work out a payment arrangement, it is absolutely 
critical that the taxpayer be able to reach an employee.
    Second, the inability of the IRS to respond adequately to taxpayers 
creates disillusionment and may, in the long term, reduce compliance by 
angry and frustrated taxpayers.
    In this instance, the congressional objective of providing 
immediate economic stimulus likely outweighed the consequences I have 
described. But it is important to keep in mind that there have, in 
fact, been trade-offs, and some things will fall through the cracks if 
the IRS is simultaneously asked to run a filing season and administer a 
stimulus program of this magnitude on short notice.
C. The IRS Projects That Its Administration of the ESP Program Will 
        Reduce Collections Slightly.
    Because the IRS has reassigned employees from ACS to assist in 
administering the stimulus payments, the IRS estimates that the loss in 
collection revenue will be approximately $565 million.\39\ In FY 2007, 
for comparison, IRS net collections totaled $2.4 trillion,\40\ and IRS 
enforcement revenue totaled $59.2 billion.\41\
    \39\ Id. According to IRS data, ACS collections are 35.0 percent 
lower in May 2008 as compared with May 2007. IRS Collection Activity 
Reports 5000-1 and 5000-2.
    \40\ IRS Data Book: 2007, Table 1.
    \41\ IRS Fiscal Year 2007 Enforcement and Services Results 
(accompanying chart) (available on the IRS website).
III. There Have Been Glitches and Taxpayer Frustrations, but They Have 
        Been Minor and Relatively Few.
    During the administration of the stimulus program, the IRS has 
encountered a few problems and taxpayers have experienced a few 
additional sources of frustration that are not attributable to IRS 
    As discussed above, the largest source of taxpayer frustration has 
been the difficulty of reaching an IRS telephone assistor on the toll-
free lines. I will discuss other issues below.
    As an initial matter, I note that the IRS reports it has not 
detected significant problems involving identity theft (e.g., the 
misuse of another person's Social Security number) with the stimulus 
program. Particularly because millions of individuals filing ESP-only 
returns have not filed tax returns for a number of years, there was 
concern that upon filing, some taxpayers would discover that someone 
else had been filing returns using their SSN, causing the IRS to freeze 
the stimulus payment. In response to these concerns, the IRS reports 
that it established a specialized unit to analyze ESP-only returns for 
the purpose of identifying potential identify theft-related problems. 
The IRS reports that it has identified only 25 instances of potential 
identity theft to date.\42\ While this report is encouraging, I remain 
concerned that the IRS does not have a comprehensive means to identify 
and track all cases of identity theft. The Federal Trade Commission 
(FTC) has reportedly received approximately 150 complaints about 
identity theft problems relating to stimulus payments, and a quick 
survey of TAS's Local Taxpayer Advocates about stimulus-related 
problems turned up 13 cases. Neither the FTC nor TAS complaints have 
been validated, but they do suggest that the universe of ESP identity 
theft-related cases is likely to be somewhat larger than the current 
IRS data suggest. I will continue to monitor identity theft problems 
arising in the context of the stimulus program.
    \42\ IRS Response to TAS Information Request (June 13, 2008).
A. In About 350,000 Cases, Taxpayers Have Not Received Additional 
        Stimulus Payments of $300 Per Child to Which They Are Entitled.
    Under the Economic Stimulus Act, a taxpayer is entitled to receive 
an additional payment of $300 for each dependent who is a ``qualifying 
child.'' \43\ Thus, for example, a couple that has four children and 
files a joint return may be entitled to a total stimulus payment of 
$2,400 (i.e., $1,200 plus $300 for each of four qualifying children).
    \43\ IRC Sec. 6428(b)(1)(B) (adopting the definition of a 
``qualifying child'' in IRC Sec. 24(c)).
    On Forms 1040 and 1040A, IRS programming code looks to whether the 
Child Tax Credit checkbox on line 6c, column (4) is checked to 
determine whether to allow the additional $300 credit. On approximately 
350,000 returns, this box was not checked even though the taxpayer was 
entitled to an additional payment with respect to one or more children.
    The IRS reports that there were two sources of this problem. First, 
some taxpayers who prepared their returns on paper did not check the 
box. Second, two tax software products used primarily by tax 
professionals were not properly programmed to check the box.
    The IRS reports that it will be able to identify returns where a 
taxpayer had a qualifying child but did not check the box and that it 
will send paper checks to the affected taxpayers beginning immediately 
after the regularly scheduled payment of stimulus checks ends in 
    \44\ Statement issued by IRS Office of Media Relations 
B. Approximately 1,500 Stimulus Payments Were Transmitted into Wrong 
        Bank Accounts and Personally Identifiable Information Was 
    On May 15, Newsday reported that some stimulus payments were 
deposited electronically into the wrong taxpayers' bank accounts. The 
article said that one taxpayer reported receiving a deposit of $1,800 
bearing another taxpayer's SSN.\45\
    \45\ Carol Polsky, IRS: Some Stimulus Checks Misrouted, Newsday, 
May 15, 2008 at A18.
    The IRS has acknowledged that a programming error caused 1,500 
stimulus direct deposits to be transmitted to incorrect bank accounts 
and that Social Security numbers were transmitted along with the 
    The IRS reports that it quickly corrected the problem and that no 
additional erroneous deposits have been made.
    According to the IRS, almost all taxpayers who should have received 
their payments electronically have since been sent checks. The 
remaining taxpayers will receive their checks within the next few 
weeks. The banks have returned approximately 250 of the erroneous 
deposits to date, and the IRS is seeking to recover the remaining 
erroneously transmitted funds.
    The IRS reports that it is also determining whether to provide the 
taxpayers whose SSNs were exposed with a credit monitoring service.\46\
    \46\ IRS Response to TAS Information Request (June 13, 2008).
C. Up to 22,000 Taxpayers May Have Received a Notice Containing 
        Information About a Different Taxpayer's Stimulus Payment.
    The IRS is sending a notice, CP 1378, to all confirmed recipients 
of stimulus payments to explain how the amount of their stimulus 
payment has been calculated. The IRS reports that in up to about 22,000 
cases, the first page of the notice contained information for one 
taxpayer while the second page carried information for a different 
taxpayer. These notices contained truncated SSNs on the first page, and 
no personally identifiable information on the second page.\47\
    \47\ Id.; see also Diane Freda, Tax Refunds: IRS Investigates 
Economic Stimulus  Payments After Statements Mailed to Wrong People, 
BNA Daily Tax Report (May 16, 2008).
    The IRS reports that it has received slightly more than 200 
inquiries thus far, a relatively low number which could indicate that 
not all 22,000 notices were mailed in error. It reports that it cannot 
determine the exact number.
    The IRS reports that the problem was attributable to an error by a 
print vendor and was limited to one printer at one site.\48\ The vendor 
will issue corrected notices with the following explanation of the 
    \48\ IRS Response to TAS Information Request (June 13, 2008). The 
IRS provided the following additional explanation:
    The error was made during a 15-minute run in which the printer 
feeder was, at times, pulling two pages through. The quality control 
employee responsible for checking runs at certain intervals did not 
pull the six samples he should have at the beginning of the new run. 
The mistake was discovered when the machine went down for another 
reason and a sample was pulled at that point. The CEO took immediate 
and decisive action, and he also made changes to the quality review 
process. They are now using two quality reviewers instead of one, and 
quality review is taking place at 15-minute intervals instead of 30-
minute intervals.
    Due to an error by the print vendor, your original notice may have 
included information regarding another taxpayer's stimulus payment. To 
ensure you receive the originally intended information for you, we are 
resending this notice. We apologize for any inconvenience this may have 
    The IRS's Privacy, Information Protection, and Data Security 
Advisory Committee was notified of a data breach with respect to the 
taxpayers affected by the CP 1378 print problem. The committee agreed 
unanimously that the level of risk of identity theft posed by the 
erroneous mailing did not rise to the level requiring data loss 
notification and the invocation of credit monitoring and other 
services. The committee reached a consensus that the corrected notice 
with the apology statement quoted above is sufficient notice to these 
taxpayers about the incident.\49\
    \49\ Id.
D. More Than 20 Million Taxpayers Who Purchased RALs or RACs Must Wait 
        Up to 2-1/2 Months Longer Than Other Taxpayers to Receive Their 
        Stimulus Payments.
    As of June 10, the IRS reports that 9.9 million taxpayers have 
purchased refund anticipation loans and 10.5 million taxpayers have 
purchased refund anticipation checks in2008.\50\ When a taxpayer 
purchases either of these products, a temporary bank account is created 
in the taxpayer's name and the taxpayer's refund is paid into that 
account, but the taxpayer does not control the account.
    \50\ IRS Response to TAS Information Request (June 12, 2008).
    In general, the IRS is issuing stimulus payments electronically if 
bank account routing information appears on the taxpayer's 2007 tax 
return Because RAL and RAC accounts are temporary and not controlled by 
the taxpayer, however, stimulus payments deposited into those accounts 
would not reach the taxpayer. Fortunately, the IRS receives an 
electronic indicator when a RAL or RAC is associated with a return, and 
the IRS was able to program its systems to send paper checks to all 
taxpayers whose 2007 returns were accompanied by one of the 
    \51\ In February, one tax-preparation company notified the IRS that 
it had failed to include RAL indicators on approximately 450,000 
electronically filed returns. The company and the bank providing the 
RALs were able to provide the routing transit numbers (RTNs) used for 
the RALs. The company provided this information early enough so that 
the IRS was able to include in its programming a requirement to convert 
returns bearing those RTNs to paper checks. The IRS reports that the 
taxpayers whose returns were involved generally did not experience 
delay in receiving their stimulus payments. IRS Response to TAS 
Information Request (June 13, 2008).
    These taxpayers are receiving their stimulus payments according to 
the schedule established for the issuance of paper checks--with some 
coming as late as mid July--instead of receiving their stimulus 
payments electronically in May. Thus, more than 20 million taxpayers 
who purchased RALs and RACs must wait up to 2\1/2\ months longer to 
receive their stimulus payments than taxpayers who did not purchase 
those products.
    Some taxpayers who purchased RALs or RACs have complained that 
their preparer or software vendor did not inform them that their 
stimulus payments would be delayed. While these delays are not 
attributable to IRS error, I understand the frustration these taxpayers 
are experiencing, and I believe this is one reason among many why RALs 
and RACs are not a good choice for most taxpayers.\52\
    \52\ These problems also demonstrate why the IRS should develop 
plans to deliver tax refunds via Treasury-issued debit cards, as 
Treasury is doing currently for Social Security payments. See Lori 
Montgomery, Treasury Dept. Rolling Out Social Security Debit Card, 
Washington Post, June 10, 2008, at D3.
E. The IRS Has Deployed a ``Where's My Stimulus Payment?'' Application 
        on Its Website But Its Usefulness Is Limited and May Be 
        Contributing to More Telephone Calls.
    For several years, the IRS website has provided an automated self-
service application known as ``Where's My Refund?'' that allows 
taxpayers to check on the status of their refunds within days of 
submitting their returns. In an effort to assist taxpayers and reduce 
the volume of telephone inquiries regarding stimulus payments, the IRS 
developed an application known as ``Where's My Stimulus Payment?'' 
However, the IRS has told us that the data source that populates the 
application is updated at the time the stimulus payment is processed. 
As a consequence, the IRS acknowledges that ``Where's My Stimulus 
Payment?'' may not reflect electronic payments until after the funds 
have been deposited into the taxpayer's bank account.\53\
    \53\ IRS Response to TAS Information Request (June 13, 2008).
    Because of the ease with which taxpayers may access ``Where's My 
Stimulus Payment?'' and the uncertainty many taxpayers inevitably feel 
when they find no information, it is possible that this application may 
inadvertently be causing confusion and thereby increasing call volumes. 
The IRS is encouraging taxpayers to use its website to obtain 
information on stimulus payments, but when they try, they often cannot 
get the information they are looking for, and this uncertainty likely 
drives them to use the toll-free telephone lines. The IRS should review 
this application and identify improvements that can eliminate or 
minimize this downstream impact for future initiatives.
F. Local Taxpayer Advocates Report That Taxpayers Are Encountering Some 
        Difficulties in Obtaining Their Economic Stimulus Payments.
    A recent informal survey of Local Taxpayer Advocates has identified 
a number of issues that have resulted in incorrect, delayed, or 
unexpectedly reduced economic stimulus payments and may lead to 
increased IRS and Taxpayer Advocate Service (TAS) telephone volumes. 
The most common request for TAS assistance regarding ESPs is the 
taxpayer's need for an expedited refund. Generally, taxpayers who are 
experiencing a hardship can request a ``manual refund'' or ``offset 
bypass refund'' (OBR).\54\ A manual refund speeds up the process by 
which a taxpayer receives his or her refund. An OBR permits a 
taxpayer's refund to bypass any outstanding tax liability.\55\
    \54\ IRM (March 19, 2008).
    \55\ If a taxpayer claims a refund on his regular income tax return 
but the taxpayer also owes federal taxes for another tax period or tax 
type, the refund may be offset against the outstanding tax liability. 
IRC Sec. 6402(a). However, when the taxpayer can demonstrate that 
failure to receive the refund will cause a hardship, the IRS can 
implement an ``offset bypass'' and issue a ``manual refund'' (i.e., 
override the automated offset process). IRM (March 19, 
    As both a policy and practical matter, the IRS decided not to allow 
manual refunds or offset bypasses for ESPs except in certain limited 
circumstances. \56\ Thus, when taxpayers experiencing hardships call 
the IRS or TAS for an expedited stimulus payment or because they have 
not received their payment when or as expected, their hopes are dashed 
when they learn that their stimulus payment cannot be expedited or will 
offset a back tax debt. For some taxpayers who received manual 
(hardship) direct deposit refunds for their 2007 returns, the IRS 
systems may delay their ESP longer than projected because of holds on 
their accounts following the manual refund. The IRS's failure to 
adequately publicize or explain the offset rule leads to taxpayer 
confusion and frustration as well as increased taxpayer calls. It is 
not clear whether, with additional lead time, the IRS could have 
identified a way to allow for ESP manual refunds or OBRs in hardship 
    \56\ The IRS will issue a manual refund or OBR on a stimulus 
payment when the IRS has placed a freeze on the taxpayer's return, such 
as when the return is identified by the Questionable Refund Program, in 
identity theft situations, or when duplicate returns have been filed. 
IRM (May 14, 2008).
    Local Taxpayer Advocates also reported that the processing of 
Injured Spouse claims has delayed ESPs.\57\ They note that the 
disbursement of payments is inconsistent when one spouse on a Married 
Filing Joint return claims Injured Spouse status. In some instances, 
although IRS systems showed the ``Injured Spouse'' indicator for that 
return which should have resulted in a 50-50 split of the ESP (with 
one-half offset to the debtor spouse's IRS debt and one-half issued to 
the non-debtor spouse), the full amount of the ESP was offset and 
applied to the debtor spouse's IRS debt. In other instances, the full 
amount of the ESP was issued in two checks even though there was an 
existing IRS debt for the primary spouse.
    \57\ Injured Spouse is a process by which a non-debtor spouse 
informs the IRS, via Form 8379, Injured Spouse Allocation, that the 
portion of a tax refund attributable to the non-debtor spouse should 
not be offset against the debtor spouse's tax liability. See IRM (Oct. 1, 2007).
    TAS identified other instances in which taxpayers have encountered 
problems obtaining their stimulus payments because the law or systems 
prevent it:

      Taxpayers whose 2007 accounts are ``frozen'' will not 
receive their stimulus payments according to the published schedule.
      A taxpayer's stimulus payment will be delayed when the 
name and SSN of one spouse do not match Social Security records. This 
situation commonly occurs when a spouse has changed his or her name as 
a result of a change in marital status but has not notified the Social 
Security Administration of that change. In normal tax return 
processing, the IRS can correct its records by looking at its own data 
and process the return. Under the ESP initiative, however, these 
taxpayers have no recourse other than claiming a credit on a 2008 
return with a valid name and SSN match.
      Taxpayers who receive supplemental security income (SSI) 
and have no adjusted gross income are not eligible to receive stimulus 
payments, yet due to confusion, some have filed ESP-only returns and 
are now wondering why they have not received their payments.

    Many Local Taxpayer Advocates noted that the influx of calls to TAS 
offices was in part the result of IRS and other publicity focusing on 
the maximum amount of the stimulus payment and the schedule of 
payments, without highlighting the exceptions to the schedule or the 
different levels of payments. One exception in particular caused 
confusion--taxpayers who filed on April 15 would not have payments 
issued according to the published schedule. The IRS did not make 
sufficiently clear that returns had to be processed by April 15 for 
taxpayers to receive payments according to the schedule.
IV. ESP Outreach Poses Many Challenges to the IRS and Its Stakeholders.
    The Economic Stimulus Act payments are based on a simple premise--
get money out to taxpayers and certain other individuals quickly to 
stimulate the economy. The details of the eligibility for payment, 
application for payment, and method of payment delivery, however, are 
anything but simple. These complexities make it extremely difficult for 
the IRS and its stakeholders to craft a clear, comprehensible, and 
succinct communications campaign. Indeed, when I taped a video message 
early in the filing season presenting information that I believed 
taxpayers needed to know about ESPs, the video (a ``TAScast'') ran more 
than seven minutes long.\58\
    \58\ See http://www.tax-toolkit.com/Video_Tax_Help.cfm.
    An effective outreach and education strategy is especially critical 
for the estimated 20.5 million individuals who have no tax return 
filing requirement yet receive Social Security or Veterans Affairs 
benefits. These individuals must take an affirmative step to receive 
their stimulus payments--i.e., they must file a tax return. 
Communicating with this population presents a significant challenge, 
given the complications of age and disability. While the IRS, TAS, and 
our stakeholders have taken some effective steps and certainly can do 
more in this regard, the ESP requirements are so complex that no amount 
of communication by the IRS will reach all 20.5 million individuals, 
and even when the message is delivered, it may not be accurately 
understood. For the reasons outlined in the following discussion, it 
may be that the IRS is not the appropriate agency to deliver payments 
to special populations who otherwise would have no contact with the 
A. The IRS's General Communications Strategy Is a Good Starting Point 
        for More Specific Outreach Initiatives.
    The IRS began developing an outreach and communications plan as 
soon as it learned of a potential economic stimulus package.\59\ This 
plan set out IRS outreach in four phases:
    \59\ IRS Wage & Investment Division (Customer Assistance, 
Relationships and Education), FY 2008 Economic Stimulus Payments (ESP) 
Outreach Campaign (April 24, 2008).

    1.  2008 Filing Season Efforts (through April 15): ``Getting the 
Word Out Far and Wide'';
    2.  Post-April 15 Efforts (April 15--June): ``It's Not Too Late to 
File for ESP'';
    3.  Community Focused Campaigns (June--August): ``Enriching the 
Economy''; and
    4.  Pre-October 15 Efforts (September--October 15): ``Don't Let ESP 
Pass You By.'' \60\
    \60\ Id.

    In implementing this strategy, the IRS developed press releases, an 
extensive website, FAQs, and sub-pages for targeted populations. It 
worked through its external partners, such as the National Governors 
Association, the National Council on Aging, the American Association of 
Retired Persons, and Catholic Charities. The IRS developed multi-staged 
mailings to taxpayers who filed their 2006 returns and to taxpayers who 
received Social Security or Veterans Affairs benefits but did not have 
a 2006 filing requirement. The mailings to Social Security and Veterans 
Affairs beneficiaries described the steps individuals should take to 
receive stimulus payments and included a Form 1040A and instructions.
    On March 29, 2008, IRS Taxpayer Assistance Centers (TACs) around 
the country hosted a ``Super Saturday'' where IRS employees, including 
TAS employees, helped taxpayers otherwise without a tax-filing 
requirement to complete their ``ESP-only'' returns on Forms1040A. The 
IRS and its partners ran approximately 700 Super Saturday sites 
nationwide. In addition, IRS Accounts Management and ACS employees 
staffed toll-free phone lines to answer taxpayers' ESP-related 
    \61\ IRS Wage & Investment Division, IRS puts its best face forward 
on Super Saturday, Insider (available at http://win.web.irs.gov/
articles/2008/Super_Saturday.htm (last visited June 8, 2008)).
    During the filing season, TACs were open for extended hours on 
several Saturdays. For the post-April 15 phase, the IRS plans to keep 
the TACs fully operational, Monday through Friday from 8:30 AM to 4:30 
PM, and to continue to assist customers with ESP applications as well 
as offer free return preparation assistance to individuals and families 
whose income is $40,000 or less. The IRS states that no advance 
appointment is required for preparation of ESP-only returns.\62\ 
Moreover, TAS was informed that 67 ``partners'' (mostly or all VITA 
sites) in 21 states have scheduled ESP tax preparation activities 
beyond June 16. While these partner activities are helpful, these sites 
do not have a national scope. For example, there are just two sites in 
the State of New York (Jamaica and Kingston), with none in 
    \62\ IRS Response to TAS Information Request (June 13, 2008).
    \63\ Email from SPEC Senior Communications Analyst to TAS Senior 
Program Analyst (June 11, 2008) (email on file with the Taxpayer 
Advocate Service).
    In addition to these national scope activities, IRS Stakeholder 
Partnerships, Education and Communication (SPEC) and Government Liaison 
employees have organized many local outreach sessions with stakeholders 
and congressional offices. TAS employees also participated in these 
B. The Taxpayer Advocate Service Has Partnered with Local IRS Personnel 
        and Initiated Grassroots Outreach.
    The Taxpayer Advocate Service's public information, education, and 
outreach efforts have also helped to improve public awareness. When 
President Bush signed the Economic Stimulus Act of 2008 into law in 
February, our Local Taxpayer Advocates (LTAs) were in Washington, DC, 
delivering the National Taxpayer Advocate's 2007 Annual Report to 
Congress to their congressional offices. We immediately provided the 
LTAs with ESP talking points that enabled them to address questions 
from congressional staffs. The LTAs continued their outreach in the 
weeks that followed, supporting congressional offices and the IRS's 
Governmental Liaison staff at ESP events and working with other IRS 
functions and local organizations to inform taxpayers about stimulus 
payments. Because all LTAs are required to conduct 40 grassroots 
outreach events every year, the foundation for this initiative was 
already in place.\64\
    \64\ Taxpayer Advocate Service, FY 2008 Operational Priorities, 
TAS-13.1-1007-002, Attachment 1 (Nov. 2, 2007), at 20.
    TAS moved quickly to bring the Low Income Taxpayer Clinics (LITCs) 
into the ESP outreach process. On March 6, TAS hosted a nationwide 
conference call on ESP issues for LITCs, and IRS representatives from 
the Office of Chief Counsel, Communications and Liaison, and the Wage 
and Investment Division's Customer Assistance, Relationships, and 
Education (CARE) organization participated. This gave approximately 100 
LITC participants an opportunity to bring specific questions the 
clinics had encountered in working with taxpayers to the attention of 
the IRS.
    TAS also collected and provided the IRS with comments from both the 
LITCs and Taxpayer Advocacy Panel members on an early draft of the Form 
1040A-3 information package for the ESP-only population. TAS created an 
Economic Stimulus page on its public website \65\ and provided an e-
mail address to the LITCs to pose questions. As part of this 
coordinated approach, with the goal of using all the tools at hand, I 
recorded a ``TAScast'' video message for the ESP-only population. TAS 
placed this video on its three external ``toolkit'' websites and 
marketed it through YouTube.\66\ Additionally, we placed an IRS video 
(in English and Spanish) for Social Security and Veterans Affairs 
benefits' recipients and an American Sign Language video on our Tax 
Literacy Toolkit.
    \65\ Taxpayer Advocate Service, Economic Stimulus Payments, at 
    \66\ The websites include the Tax Literacy Toolkit at http://
www.tax-toolkit.com/Welcome.cfm, the Electronic Press Kit at http://
www.irs-tas.com, and the Advocate Toolkit, which is primarily a 
resource for LTAs, at http://advocatetoolkit.com.
    Local Taxpayer Advocates have participated in many of the IRS 
initiatives and conducted their own outreach through their grassroots 
contacts. In Philadelphia, TAS participated in several ``Senior Expos'' 
sponsored by local and state representatives, providing general and 
specific information about the ESP program. Detroit TAS participated in 
a webcast with a local television station. In Mississippi, TAS provided 
information to employees of the Jackson Senior Service Division 
regarding the stimulus payments. These employees in turn provided 
information to the senior-citizen homes and other senior-citizen groups 
throughout the city.
    Low Income Taxpayer Clinics also are doing their share of ESP 
outreach and education. Clinics have conducted outreach presentations 
at elderly and disabled low income housing facilities in New Hampshire, 
given interviews on local Spanish language television stations in 
Central California, made presentations to local senior centers and 
English as a second language (ESL) classes in Arkansas, conducted 
outreach to a foster grandparents association and an independent living 
service organization in Richmond, Virginia, and participated in many 
other activities throughout the United States in partnership with VITA 
sites and other nonprofit organizations.
C. Barriers to Obtaining Participation of Social Security and Veterans 
        Affairs Beneficiaries Present a Challenge to the IRS.
    As noted above, the IRS developed a special 1040A package that it 
sent to about 20.5million Social Security and Veterans Affairs 
beneficiaries who did not file tax returns for 2006. To date, 
approximately 7.7 million of these individuals have filed 2007 
returns.\67\ The IRS is planning to send another notice to those 
taxpayers who have not yet filed. This second notice will be identical 
to the first, except that it will incorporate some visual improvements, 
including a larger font size for the notice itself and an easier-to-
read font color. The accompanying Form 1040A return will not be in a 
larger font.
    \67\ IRS Economic Activity Stimulus Report (June 17, 2008).
    Notwithstanding the efforts of the IRS, TAS, and outside groups to 
reach this population, there are major challenges to achieving a 
significant participation rate. In addition to the fundamental 
complexity of the program, challenges include the following:

      Some senior citizens may view filing a return as 
requiring too much effort for $300.
      This population may lack Internet access or may be 
uncomfortable obtaining tax information from the Internet.
      This population may lack the mobility necessary to obtain 
assistance in applying for the ESP.
      Members of this population may be incapacitated and under 
the care of guardians, conservators, or nursing homes and hospitals.
      The return preparation cost may be too great and they may 
not know how to obtain free return preparation.
      Individuals who have not had contact with the IRS for 
years may be unwilling to start filing with the IRS, for fear of losing 
government benefits or because of a more generalized fear about contact 
with a federal enforcement agency.
      Confusing messages, conflicting information, not enough 
information, or too much information can all discourage participation.

    The following is an email I received from the Director of a Low 
Income Taxpayer Clinic in the Midwest, which illustrates some of the 
confusion relating to the ESP program:
    Communications about the ESP was TERRIBLE. Taxpayers received too 
much information--much of it incorrect--from too many places. Taxpayers 
were just confused and overburdened with information--from local and 
national news programs to local and national TV commercials there was 
information (misinformation) on ESP. There is going to be a lot of 
duplicate filings of the 1040A (ESP) and it is not ``fraud'' it is just 
``misunderstanding'' by the individuals filing these returns. We have 
already been asked to participate in many regional news programs to 
answer taxpayers questions about why people have not received their ESP 
based upon the timeline on IRS.gov and why EVERYONE is NOT receiving 
$600 for themselves and $300 for all of their dependents.
    We heard from many Social Security/Disability recipients who filed 
a tax return for 2007 in February, prior to the Social Security 
Administration mailing, thinking they also had to send in the 1040A to 
receive their ESP. Even though the mailing sent to them by the Social 
Security Administration said at the top that they did not have to file 
if they had already filed a 2007 tax return they either could not or 
did not read this message or they were just afraid they would not get 
the ESP unless they filed the form they received in the mail.
    The individuals who are having to file for the ESP only are not the 
most ``sophisticated'' of taxpayers. Many have not filed a tax return 
in many years due to their age. They just do not understand the 
process. We had (and are still having) numerous calls from VITA/TCE 
clients in our area thinking the VITA/TCE preparer made a mistake 
because the VITA/TCE site filed their ESP online or on a ``white form'' 
while the color of the paper of the form they received in the mail was 
pink. Many of these VITA/TCE clients wanted to know if it was alright 
that they had copied the information from the ``white'' copy given to 
them by the VITA/TCE volunteer to the pink paper return. When asked if 
the ``white'' form had already been filed they answered either yes or I 
don't know for sure. Even when we told them the ``white'' form that had 
been filed would work, many told us they were going to go ahead and 
mail the pink form because they wanted to be sure they received their 
    People still do not understand the $ amount they are receiving and 
or why. There was too much media raising individuals expectation that 
everyone would receive $600 and $300 for their dependents. I have had a 
local ``diamond'' outlet's commercial repeated to me many times as 
``proof'' they were suppose to receive $600 for themselves and $300 for 
their dependents. The common comment is ``It is you and the IRS who do 
not understand the amount I should have received, don't you listen to 
TV, etc.'' \68\
    \68\ Email from the Director of a Low Income Taxpayer Clinic (email 
on file with the Taxpayer Advocate Service).
    Given the message saturation and confusion described in the email 
above, coupled with the characteristics of the target population, is it 
any wonder that the IRS's phone lines have been swamped and that 
millions of eligible individuals have not yet filed?
V. Some Modest Suggestions for Future Initiatives
    One lesson to be learned from this year's ESP initiative is that 
message saturation creates taxpayer confusion and causes unnecessary 
work for the IRS. Although a saturation campaign certainly gets the 
word out about a program, the owners of the campaign quickly lose 
control of the message. Thus, advertising by diamond merchants, 
department stores, auto dealers, and electronics stores enticing 
taxpayers to spend stimulus payments on their products reinforce an 
inaccurate message. Taxpayers come to expect the maximum stimulus 
payment amount and don't understand the exceptions. This uncertainty 
and its consequences can even defeat the underlying purpose of the 
stimulus payments. Although taxpayers may spend more--either on credit 
or with savings--in anticipation of their stimulus payments, they may 
end up financially harmed if they do not receive all or part of the 
payment they are expecting and go into debt. The problems with a 
saturation message campaign are compounded if the design of the program 
itself is so complex that it takes twenty pages of Frequently Asked 
Questions and a seven minute podcast to explain it. If Congress decides 
to enact another ESP, it should consider how to simplify the 
eligibility rules so that they lend themselves to easy communication. 
Such simplification may mean that some individuals receive more or less 
than they might under the current ESP, but this trade-off for clarity 
would be well worth it.
    A second lesson is that when an initiative targets a population 
that does not otherwise have contact with the IRS, it may be better to 
utilize another federal agency for payment delivery. The 20.5 million 
Social Security and Veterans Affairs beneficiaries all receive payments 
from those agencies, and many of those payments are directly deposited 
into bank accounts. Why not find a way to let those agencies make 
stimulus payments to individuals without a tax filing requirement 
instead of requiring them to file ESP-only returns and having the IRS 
then send them paper checks? The Social Security Administration and the 
Treasury Department recently announced the availability of a no-fee 
debit card on which unbanked Social Security recipients may receive 
their benefits.\69\ Why not download the value of the stimulus payments 
onto such cards?
    \69\ The Department of the Treasury estimates that by converting 
the 10.5 million people who still receive paper Social Security checks 
once a month to electronic payments, the Federal Government could save 
up to $42 million a year. Lori Montgomery, Treasury Dept. Rolling Out 
Social Security Debit Card, Washington Post, June 10, 2008, at D3.
    Third, where there are no better alternatives than for the IRS to 
deliver such payments, the IRS and other federal agencies could 
cooperate to determine the exact payments to these special populations 
and the best method for delivering them. The ESP could be designed so 
that the IRS, the Social Security Administration, and the Department of 
Veterans Affairs work together to identify which beneficiaries do not 
have a filing requirement but have at least $3,000 in benefits. Why 
force these individuals to file a tax return? Why not authorize the 
agencies to determine eligibility based on available information? \70\ 
Moreover, once the IRS determines eligibility and the amount of 
payment, the IRS itself should develop the ability to utilize no-fee 
debit cards to deliver stimulus payments (and all tax refunds).
    \70\ It is our understanding that this approach was adopted with 
the current ESP program in Puerto Rico and Guam.
    Fourth, I note that one of the circumstances that made the ESP 
initiative so challenging was the short timeframe the IRS had from the 
time the bill was enacted until the time the first ESP was scheduled to 
go out to taxpayers. The IRS found itself scrambling to work out the 
logistics, such as developing an outreach strategy and materials, 
anticipating taxpayer questions, and strategizing about the best way to 
get answers to these questions to the public. Although the ESP program 
may seem like a one-time occurrence, the IRS often faces unanticipated 
events, including natural disasters, that affect taxpayers and their 
ability to comply with their tax obligations, thereby requiring special 
rules, procedures, and outreach. Instead of scrambling to address the 
unexpected, the IRS should be able to plan for it.
    There are several concrete steps the IRS can take to prepare for 
the next unanticipated event, whether it is a congressionally mandated 
program or a Presidentially declared disaster. Although the IRS has an 
internal Disaster Readiness Group, I recommend that its mission be 
expanded and that the IRS create a larger and more diverse emergency 
readiness group of external partners from which it can solicit feedback 
on its outreach efforts. The emergency readiness group should be active 
and available all year, ready to provide guidance on the most effective 
way to communicate with taxpayers, especially groups such as the 
Limited English Proficiency population, the elderly, and people with 
disabilities. The group should include representatives from tax 
professionals associations, state governments, LITCs, the Taxpayer 
Advocacy Panel, the National Disability Institute and other SPEC 
    Fifth, for the IRS to implement emergency programs, it must 
maintain a workforce at sufficient levels to accommodate these demands 
without compromising its service levels or throwing its modernization 
efforts off course. Therefore, Congress should provide the IRS with 
funding to maintain a cadre of employees--whether they be seasonal or 
permanent--to address these situations and programmers who can work on 
these projects so that the IRS does not fall behind on its core 
business systems improvements. The internal cadre should conduct 
reviews after each unanticipated event to incorporate lessons learned 
and improvements into its standard operating procedures. Moreover, 
where glitches such as those with manual or offset bypass refunds or 
injured spouse are identified, the cadre can work on solutions in the 
downtime between events.
    Finally, the communications challenges posed by the ESP initiative 
have made the need for a cognitive learning lab even more 
compelling.\71\ In-depth research on how taxpayers learn and respond to 
communications would provide the IRS with important tools to enable it 
to educate taxpayers and increase responsiveness more effectively. The 
IRS could use the information gained from the cognitive lab to better 
tailor outreach strategies for unexpected events to meet the diverse 
needs of the tax population. We do not need to wait for a disaster or 
an unexpected initiative to learn about our diverse taxpayer base, nor 
should we. The IRS needs to go beyond mere demographics and begin to 
develop a more comprehensive understanding of its taxpayers now.
    \71\ See National Taxpayer Advocate 2007 Annual Report to Congress 
156-161 (Most Serious Problem: Taxpayer Service and Behavioral 
Research) and vol. 2, at 158-167 (Research Report: Normative and 
Cognitive Aspects of Tax Compliance: Literature Review and 
Recommendations for the IRS Regarding Individual Taxpayers).


    Chairman LEWIS. Thank you, Ms. Olson, for your statement. 
At this time, I will open the first panel for question. I ask 
that each Member follow the 5-minute rule.
    Ms. OLSON. I am submitting, for the record, two letters to 
the Subcommittee from the Federal Trade Commission and the FBI. 
These letters state that almost 300 identity theft complaints 
have been filed, related to the rebate checks.
    [Letter from the Federal Trade Commission follows:]
    [Letter from the FBI follows:]

    [GRAPHIC] [TIFF OMITTED] 50038A.001
    [GRAPHIC] [TIFF OMITTED] 50038A.002


    Chairman LEWIS. Have you seen any identity theft problems 
related to the rebate checks, or is there a form at IRS for 
taxpayers to report identity theft?
    Ms. OLSON. To date, the IRS has reported to us that they 
have only identified 25 cases dealing with identity theft and 
the economic stimulus payment itself.
    However, an informal survey in my own offices, just asking 
my local taxpayer advocates, they said that they had 13 such 
cases. So, either we have half of all IRS cases, or there are 
many more cases out there. We usually get 1 percent of problems 
that the IRS sees, as a whole.
    There is no form, presently, for taxpayers to report 
themselves an identity theft victim. I am concerned how the IRS 
is counting these cases of identity theft, because as of this 
point they have not yet implemented the marker on accounts 
where the IRS can know that there is an identity theft 
situation with respect to a taxpayer.
    Chairman LEWIS. Ms. Olson, what is the estimate cost to 
date of the rebate check?
    Ms. OLSON. I honestly do not know that number. Perhaps GAO 
could better answer that.
    Chairman LEWIS. Is Mr. White, from GAO, here today? If so, 
please come forward.
    Mr. White, could you tell Members of the Committee, what is 
the cost today of the rebate checks? How much of this is 
foregone revenue from shifting employees?
    Mr. WHITE. Yes, Mr. Chairman. There are three components to 
the cost of the rebate program that we have identified. The 
first is sup0plemental appropriations. IRS got a supplemental 
appropriation of $202 million; Social Security got a 
supplemental of $31 million; and Treasury's financial 
management service got a supplemental of $64 million. So, there 
is a total of $297 million in supplementals.
    The largest element of cost is the foregone revenue that 
Ms. Olson just described. IRS estimates that the foregone 
revenue from shifting collections staff from doing collections 
work to answering stimulus-related telephone calls to be up to 
$565 million. So, that brings the total dollar cost--the 
supplementals plus that foregone collections revenue--to $862 
    Then, there is a third component to the cost, and that is 
the burden on taxpayers of getting answers to questions about 
the stimulus program. Taxpayers are having to wait longer on 
the phones to get through, to get answers to those questions, 
and we can't quantify that in dollars, but that's a very real 
cost to taxpayers, as well.
    Chairman LEWIS. Now, for the two of you, do you expect the 
call volume to remain high through the next filing season?
    Ms. OLSON. The IRS estimates, just through the end--until 
October 15th, of them getting only about another 6 million 
calls, which I find a rather low-ball number. I think we may 
get six million calls in July. I do think, because there will 
be confusion from people who need to claim some more of the 
payment on their 2008 returns, that we will continue to get 
    We may see confusion of people who received their credit, 
claiming the credit again on their 2008 returns, because my 
understanding is there will be a line on those returns. So, I 
look forward to lots more confusion ahead.
    Chairman LEWIS. Mr. White?
    Mr. WHITE. Yes. Tax--individuals who are not taxpayers, who 
did not have a tax filing requirement, have until October 15th 
to file this year in order to claim the stimulus. So, for that 
reason, there may be more calls.
    Chairman LEWIS. Thank you. Now I turn to Ranking Member 
Ramstad for his questions.
    Mr. RAMSTAD. Thank you, Mr. Chairman. Thank you, Ms. Olson, 
for your testimony and for your articulate advocacy on behalf 
of taxpayers.
    Also, as a Member of this panel which has oversight 
jurisdiction regarding the IRS, I appreciate hearing your 
summary statement that the IRS, on balance, has done an 
outstanding job of administering both the 2008 filing season 
and the Economic Stimulus Act. It's always refreshing to hear 
when an agency of the Federal Government does a good job.
    I just have two follow-up questions--that is, follow-up 
questions to those asked by the distinguished Chairman--the 
first one regarding the diversion of collections staff.
    In your opinion, would it have been possible--hindsight is 
always 20/20, and I think we sometimes even learn from it, or 
at least we should--do you think it would have been possible 
for the Service to hire additional temporary workers to handle 
phone inquiries about the stimulus checks? Was that not done 
because of lack of funding, lack of time, or perhaps a 
combination thereof?
    Ms. OLSON. I think it is a combination thereof. The IRS did 
hold over its temporary workers that it had for its filing 
season, that it normally hires in the filing season, to deal 
with the stimulus payments, since they were, we thought, going 
to--the busy season was going to be after the filing season.
    Perhaps what really took us by surprise was the number of 
calls coming in during the filing season, and the mailings were 
an attempt to try to say, ``Don't call.'' But people called 
    I think it's hard for us, in the middle of a new 
initiative, to staff up, train, go through background checks. 
That's just a virtual impossibility. One thing I've thought is 
that if we're going to continue to get these programs given to 
us, that we may need to really think about creating just a 
cadre, whether they're seasonal workers, they're on-call 
workers, to deal with disasters, programs that Congress gives 
to us, all of those things--and I'm not equating disasters with 
programs Congress gives us.
    Mr. RAMSTAD. That was my next question.
    Mr. RAMSTAD. Well, thank you, Ms. Olson. My final question, 
I share the concern I'm sure everybody does, with the Chairman 
about identity theft. Are there any additional steps that you 
believe could be taken to prevent scam artists from using the 
stimulus payments as a way to steal the identities of 
    Ms. OLSON. I think that the outreach on that really needs 
to be local, and I think the IRS has done well with this, and 
we just need to do more of it.
    When we work through trusted partners in the communities, 
you know, come to this non-profit, come to the walk-in site, 
come to our Super Saturday, where you have trusted people 
there, then you minimize the risk of identity theft from scam 
artists, because people have an alternative place to go.
    It's when we're trying to deliver it on a national level, 
you know, file your own return, and we don't have a local 
presence, then it provides an opportunity for these scam 
artists, through lots of different ways, to move into that 
local presence, and victimize folks, and particularly the 
elderly population. We really would have problems there. So, 
going through their partners is absolutely vital.
    Mr. RAMSTAD. Well, I certainly appreciate your view. Those 
caveats, I think, are very, very important, and, as you say, 
especially to avoid our senior citizens from being victimized, 
who are disproportionately victimized by these--well, I won't 
use the word in a public hearing, but those scam artists. Thank 
you again, Ms. Olson. I yield back.
    Chairman LEWIS. Now I turn to Chairman McNulty for his 
    Mr. MCNULTY. Thank you, Mr. Chairman. I don't really have a 
question. I have an observation I want to make, and it relates 
to something you said at the end of your testimony.
    But, first of all, I want to thank you on your tremendous 
good work on behalf of taxpayers all across the country. I am 
generally in an attitude of gratitude today to all of the 
agencies involved, because I think our government workers have 
done an extraordinary job under very difficult circumstances in 
a very compact timeframe. So, I thank you all.
    You made a suggestion toward the end of your testimony 
about possibly having the SSA send out these checks. I just 
want to tell you very directly I think that's a terrible idea. 
I have spoken in the last few days to both of the commissioners 
are IRS and SSA, and they do not believe that is either 
necessary or in the best interest of the process. From--and I 
agree with them, wholeheartedly.
    You may or may not be aware of the fact that we have worked 
very, very hard in the last couple of years to help SSA deal 
with this tremendous backlog on disability claims, which is the 
result of under-funding for years and years, for which there is 
plenty of blame to go around; I'm not blaming anybody in 
particular. But that's just the way it is.
    We have--we had a good increase in the budget last year. 
According to the budget resolution this year, we will have even 
more. We put out a new ALJ list, we are in the process of 
hiring more than 175 new administrative law judges. We are 
making progress. The last thing we need to do at this point in 
time is impede that progress.
    The estimates that have been given to me would be that if 
we were to implement the suggestion that you made at the end of 
your testimony, it would take six to 8 months just to get the 
proper list together in order to get those checks out. That's 
the last thing we need to do, is further delay this process. 
So, I just want to put you on notice that certainly if I have 
anything to say about it, that's not going to happen.
    What should happen--because this, as I said in the 
beginning, this process has been largely successful, and I 
think we're kind of in the home stretch on this, now, to kind 
of wrap it up--and I think basically what we need is a good 
dissemination of information and education about what we need 
to get to the affected population, so that they get their 
stimulus checks.
    I want you to know we're going to help you with that, 
because the four people right in the middle here that you're 
looking at, we're going to get a communication out to all of 
our colleagues, every single Member of the House, about getting 
the word out about the steps that they need to take all across 
the country in all these individual districts to get the 
stimulus check to which they're entitled.
    So, as I will when the commissioners appear, I want to 
thank all of you for the tremendous work you have done. The 
last part of your testimony is a bad idea, and is counter-
productive, and I just want to let you know my feelings on 
    Ms. OLSON. Well, I hear your feelings. I can also say that, 
as a mother of a disabled son, I have navigated the disability 
process, so have some familiarity with that backlog. My 
suggestions go to that population. What I have tried to think 
about, in response to being asked to think about that, were 
alternatives, because the IRS itself also suffers from this 
additional workload, as I have outlined in my testimony, and 
taxpayers are harmed by the IRS diverting its resources on 
systems that are making the tax system easier into programs 
such as this.
    So, I have tried to think about ways that would lessen the 
burden on the IRS without placing so much burden on other 
    One of the thoughts that I had, because they seemed to be 
able to do this in Puerto Rico and Guam, is to use the 
available information that government agencies have working 
together, to identify those taxpayers entitled to the $300 
payment without making them take an affirmative act. I think 
that does require more involvement on the part of Social 
Security Administration, working with the IRS.
    The other thing that I thought----
    Mr. MCNULTY. Well, that is a different proposition.
    Ms. OLSON. Right.
    Mr. MCNULTY. SSA is working with IRS to do----
    Ms. OLSON. Yes. The other thing that I thought would be a 
positive thing is because SSA, with Treasury's assistance, now 
has these debit cards, that we could utilize the debit cards to 
get the money faster to SSA recipients. But I also propose that 
the IRS implement debit cards. My concern was SSA recipients 
having to wait for paper checks.
    So, I just wanted to give you some background to where my 
comments came from.
    Mr. MCNULTY. Right, and----
    Ms. OLSON. I hear your concerns.
    Mr. MCNULTY. Right. Well, it's not just a concern, it's a 
reality that would actually--when we're trying to speed up the 
process, that proposal would delay the process.
    I just hope you keep in mind also the comments of Chairman 
Lewis at the beginning: if IRS needs additional resources 
toward the end of this process, we want to know about that, and 
we want to help with regard to that. I thank you again for your 
    Ms. OLSON. Thank you.
    Chairman LEWIS. Now I turn to Ranking Member Johnson for 
his questions.
    Mr. JOHNSON. Thank you, Mr. Chairman. I'd just like to say 
that I hope the IRS will continue to examine the issue of 
identity theft, and take some more positive steps in that 
direction. I will yield back my time; no further questions.
    Chairman LEWIS. Thank you, Mr. Johnson.
    Mr. JOHNSON. Thank you, Sir.
    Chairman LEWIS. Thank you----
    Ms. OLSON. May I comment on identity theft a little bit, 
    The IRS--the commissioner has dedicated a lot of resources, 
since he came in, to working on this issue. There are multiple 
teams, and my organization is also involved with this. I think 
you will see some improvements over the next year. It's just 
that right now we're not there yet, and we have this program. 
So, I think you're seeing some problems, because we don't have 
the solutions in place yet. But we are working on it.
    Mr. JOHNSON. Thank you.
    Chairman LEWIS. Thank you. Now I recognize Mr. Doggett for 
his questioning.
    Mr. DOGGETT. Thank you very much, Mr. Chairman, and thank 
you for the testimony you both offered.
    Ms. OLSON. you indicated that less than 100 percent of the 
people who are entitled to receive this stimulus payment will 
receive it. What is the best estimate of how many people will 
not get the stimulus that they're entitled to?
    Ms. OLSON. Oh, I think that is--I don't know that I have 
that best estimate. We do--we have identified 20.5 million 
taxpayers, or individuals, that didn't file 2006 returns. Some 
of those--we've gotten in about seven million of those folks, 
and the question is maybe some of those other taxpayers, 
they're joint returns so we may really get more than seven 
million--you know, these are seven million returns.
    It's hard to know how many others are out there that 
don't--have too low income. They're not on Social Security 
rolls, they're not on Veterans rolls. It's a very difficult 
number to estimate.
    Mr. DOGGETT. Do you know if there are internal estimates 
within the IRS, or whether----
    Ms. OLSON. Well, it's the----
    Mr. DOGGETT [continuing]. GAO has done anything on it of--
    Ms. OLSON. It's--the 25 million is what people are working 
off of, with a recognition that there are other pockets of 
taxpayers that we just can't quantify.
    Mr. DOGGETT. Do you have any insight on that, Mr. White?
    Mr. WHITE. We don't have a separate estimate of our own. I 
agree with Ms. Olson. IRS initially estimated something over 20 
million. They're not sure whether it's going to be that many or 
not. The problem here is the difficulty of trying to estimate 
the number in that group.
    Mr. DOGGETT. While I clearly am very concerned that all 
those who are entitled to this stimulus payment get it, I note, 
as Mr. Johnson pointed out, that we have spent $300 million to 
ensure that it gets done right.
    I am also concerned about whether any of these payments are 
sent out to people that are not entitled to receive them. Are 
either of you involved on that end of it, to be sure that the 
stimulus payments only go to those who are entitled to receive 
    Ms. OLSON. Well, I think that the--actually, the way that 
the legislation has been written is pretty tight, as----
    Mr. DOGGETT. Well, let me tell you where it apparently 
wasn't tight enough.
    Ms. OLSON. Yes, Sir.
    Mr. DOGGETT. Yesterday I received a notice dated June 16th 
that my mother would receive her payment next week. My mother 
died last September. Within a week of her death, because her 
payments are direct-deposited into her account, I notified 
Social Security, to be sure that we wouldn't have any payment 
to which we were not entitled.
    Do you have any estimates? I extend this question--I may 
not be able to stay for all their testimony--to the next panel, 
as well. Do you have any estimate of how many dead people are 
receiving stimulus payments?
    Ms. OLSON. Sir, I don't. There is a question on the website 
that I will go back and look at that talks about decedents, and 
who is entitled to that payment in the course of the decedent, 
because it would be--the payment is based on their 2007 filing. 
So she filed, or her--you know, her estate filed----
    Mr. DOGGETT. Her estate filed----
    Ms. OLSON [continuing]. A return for her. Perhaps under the 
law, she is entitled to it, and I would have to check----
    Mr. DOGGETT. Well, I would like to know about that, too.
    Ms. OLSON. Yes.
    Mr. DOGGETT. If, as a part of the stimulus--in her case, 
she does not have a surviving spouse--whether this payment goes 
to estates of people this year or not, and what efforts--it 
surprises me that there has not been any update, if there has 
not, of the database to reflect that. Do you know----
    Ms. OLSON. I will check on that.
    Mr. DOGGETT. Do you know, Mr. White, if under this payments 
can be made to the estate if there is no surviving spouse of 
someone who died last year?
    Mr. WHITE. I am not sure, off the top of my head. I--given 
the short period of time that IRS has had to implement the 
program, I don't think yet there are good estimates of non-
compliance problems. We are monitoring this as part of our 
filing season work for the Subcommittee on Oversight, and we 
will be reporting later this year.
    Mr. DOGGETT. Well, it's been right at 9 months since I 
notified Social Security of this. You would certainly expect 
that they would have updated the database to show the correct 
    Fortunately, they have not been sending, to my knowledge, 
any direct deposit of her Social Security check. You would 
expect that they would have it all--all the database--corrected 
in 9 months, wouldn't you?
    Mr. WHITE. We are--this is something we are monitoring, and 
we will pursue as part of our ongoing work for the 
    Mr. DOGGETT. Thank you very much.
    Chairman LEWIS. Thank you. Now Mr. Brady is recognized for 
his questions.
    Mr. BRADY. First, let me thank Chairman Lewis and Chairman 
McNulty, Mr. Ramstad, and Mr. Johnson for hosting this hearing. 
I think it's important to do this.
    Our caseworkers, for whatever it's worth, our caseworkers 
back in Texas have experienced few complaints about the help 
line. In fact, we've gotten calls back from those we've 
referred, where they have been satisfied with the results. I 
don't know if that will continue, but that's our experience 
back home.
    The question today deals with the technical aspects of 
delivery. But I think the bigger question on the stimulus 
checks is, is it working. Are these checks stimulating our 
economy across this country, as was hoped? I think the answer 
is no, or certainly not as much as it could. There is reason 
for that.
    In the past year, rising fuel prices have, I believe, 
neutralized the impact of the stimulus checks. Just in the past 
year, the average family in America is now paying $536.50 more 
for fuel than they were a year ago. It is hard to have--with 
$300 to $600 stimulus checks, it's clear that these checks are 
being drained down our gas tanks. The impact is being 
neutralized, because families are not buying a new computer, or 
a washer and dryer or a TV set when they can't afford gas for 
their family van.
    It's frustrating that this Congress has failed to act to 
lower fuel prices in America. We have, unfortunately, found 
time in the past few weeks to pass legislation through the 
House to protect exotic cats and dogs in foreign countries. We 
found time to celebrate the International Year of Sanitation. 
This week we found time to prevent monkeys from crossing state 
lines. But we have not found time to take the actions to lower 
fuel prices for American workers.
    That cost of $536 more is even higher if you live in a 
rural community, which much of America does. It just seems to 
me both Republicans and Democrats together have to find a way 
to unlock our resources here in America to produce more 
American-made energy, to take more responsibility for the daily 
energy needs. Because being dependent on foreign countries for 
nearly two-thirds now of our daily energy needs is costing us 
at the pump, and it's robbing the impact of these stimulus 
    Ms. Olson, I won't ask you that question, the impact.
    Ms. OLSON. Thank you.
    Mr. BRADY. I will say, though, you have raised a separate 
issue from that, which I feel we ought to be exploring. That's 
the issue of debit cards. Seems to me we need a--as much as we 
can--more of a 21st century response to challenges, short-term 
challenges, like this.
    Can you comment on how those would occur, and who would be 
eligible to get them?
    Ms. OLSON. Well, I do think I have to say the IRS is 
exploring the idea of delivering regular refunds on debit cards 
as Social Security has started to use debit cards for those 
individuals who don't have bank accounts. There are savings to 
the government in that regard, so that you don't have to issue 
paper checks.
    A debit card has an account number and a routing number, 
just the same way as a bank account does. I think my 
understanding is, with Social Security, that Treasury has 
entered into a contract with one entity to deliver these cards. 
It's no fee to the individual receiving the card. It can be 
done in any number of ways: people going into banks and picking 
up a card, or being assigned a card themselves.
    So, I think that, you know, the--that would just--for those 
individuals who are unbanked, or even in the area where we're 
sending out paper checks, the delivery of dollars is so much 
faster if we're delivering it electronically.
    Mr. BRADY. Yes.
    Ms. OLSON. The debit cards are just really, to me, as you 
said, a 21st century solution.
    Mr. BRADY. Those debit cards, since people are struggling 
so much with high fuel prices, you know, if they weren't able 
to afford something they needed, but instead had to buy higher 
gas, would they be eligible to use it at the gas pump?
    Ms. OLSON. Absolutely. The Social Security cards are used 
anywhere that essentially a credit card is taken. So, at food 
stores, at gas tanks, at ATMs, et cetera.
    Mr. BRADY. All right. Thank you, Chairman. Yield back.
    Ms. OLSON. Mr. Chairman, may I answer Congressman Doggett's 
question? I found----
    Chairman LEWIS. Yes, you may, Ms. Olson.
    Ms. OLSON. Thank you. There is a FAQ on the IRS website 
that says, ``If an individual dies, what happens to his or her 
direct deposit, or stimulus check?'' The answer is, ``Stimulus 
payments will be issued in the name of the individual eligible 
for a payment on a filed 2007 income tax return, or to the 
account designated by the individual on that return. This 
includes situations where a person dies after filing a return, 
or where the final 2007 income tax return was filed by a 
personal representative or surviving spouse.''
    ``Any issues or concerns involving a decedent's filed 
return, or the related stimulus payment, should be addressed by 
the legal representative of the decedent's estate.'' So----
    Chairman LEWIS. Now I turn to Mr. Pascrell for his 
    Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, with 
all due respect to my good friend from Texas, the last thing 
that these Members need is another lecture on drilling. But I 
am sure that will not be the last one.
    You know, if you're respectful of the Members, if you're 
respectful of the Members, then you bring to folks' attention 
the high cost of everything, not just gasoline.
    Second of all, this is not germane to the topic, not at 
    Mr. BRADY. Will the gentleman yield?
    Mr. PASCRELL. Sure.
    Mr. BRADY. One, Bill, I think you're wonderful, and I 
appreciate your leadership, but I do think fuel prices are 
germane to this discussion on stimulus checks. Not only are 
fuel prices up, but food prices, because we have not dealt with 
this fuel issue. That is driving a good amount of food prices, 
cost increases, as well.
    So, while it is important to folks on the technical side, I 
think most of America is struggling, and needs some help that 
way. That is the only reason I point this out, because I think 
that's the bigger picture we ought to be looking at. I yield 
back, I apologize.
    Mr. PASCRELL. Yes, thank you, Mr. Brady. The gas prices 
didn't just go up the last 6 months or the last year. Gas 
prices have been going up since 2001. You know they've 
increased 270 percent.
    Mr. BRADY. Yes, 170 of that----
    Mr. PASCRELL. It didn't just happen, and----
    Mr. BRADY [continuing]. In the past year.
    Mr. PASCRELL. So, to create the impression, which is in 
your talking points--not you, but your party's talking points--
that this is going to be we're going to be saddled with this, 
has nothing to do with the questions we should be asking Ms. 
Olson. I don't think so. Maybe--am I out of order? Tell me. But 
I don't think it has anything to do with the price of tomatoes.
    I am concerned about this number: 3,776,147 people over the 
age of 65 remain to file for the checks under SSA and VA. In 
New Jersey, it's 108,803, 69 percent. I would like to know, Ms. 
Olson, what are you doing about it?
    Ms. OLSON. Well, the IRS is mailing to those individuals 
that we've been able to identify, through the help with Social 
Security and Veterans Administration, a second mailing, asking 
them to come in and file, and providing to them the return that 
they need to fill out in order to get this payment.
    The IRS is continuing, through its walk-in sites, to--
located throughout the United States--to prepare these ESP-only 
returns for free for taxpayers, if they can come in. They are 
continuing to work with their non-profit partners to have 
initiatives that go out, as are my employees.
    I think that there are--as I outlined in my testimony--some 
natural barriers to getting some of these folks who have not 
had any trafficking with the IRS for several years to want to 
file a return again, which led to my recommendation for future 
efforts, that we try to come up with a way where we can 
automatically get this money to them, without them having to 
file a return. Because I think, with some of this population, 
that's too difficult.
    Mr. PASCRELL. I mean, no other demographic group is even 
close to this group. You would agree to that, right?
    Ms. OLSON. Oh, when we----
    Mr. PASCRELL. I mean, the next group is like 13 percent.
    Ms. OLSON. When we know, particularly with the--since we're 
basing the information on who has filed a return the previous 
year, we have a lot of information on those populations, and 
we're basing it off of their 2007 return.
    Mr. PASCRELL. Well, what can we learn from the Treasury 
Department's inability to communicate to EITC recipients, for 
instance--if I could draw a parallel here--and you know the 
millions and millions and billions of dollars that are 
unclaimed with those who are the working poor, which we are 
dedicated to, I'm sure both sides of this aisle. Have we 
learned anything from their shortcomings?
    Ms. OLSON. Well, the IRS actually does a very good job--
I've spent my life around the earned income tax credit. What is 
interesting in those numbers is that we have a very high 
participation rate among families with children.
    Where we have a very low participation rate is the EITC 
that goes to the non--you know, the worker that doesn't have a 
child, which, to some extent, is in this other population for 
the Social Security--I mean the economic stimulus payment: low-
income workers that maybe don't have enough income to file an 
income tax return.
    Mr. PASCRELL. Right.
    Ms. OLSON. I think they're both very difficult populations 
to get to. They don't necessarily have Internet access. If they 
have access, they don't necessarily have Internet literacy to 
do the kinds of things that you might need to do to file a 
    Again, as I said earlier, I think that the IRS sometimes is 
not really the best--the entity to communicate that. I mean, 
after all, we are an enforcement agency, on top of everything 
else. So, that's why we have to really work with our partners, 
whether it's the states and state agencies, or congressional 
offices, or non-profits in the community that, for other 
reasons, are reaching out to these populations.
    Mr. PASCRELL. If we're passing legislation, Mr. Chairman, 
to help those who need this most, and for those who are older, 
like myself, and those who become incommunicable, this is a 
very difficult situation which I don't see any--I'm not in a 
comfort state right now----
    Ms. OLSON. Right.
    Mr. PASCRELL [continuing]. To know that we're getting to 
this public, and yet this is a lot of money we're talking about 
    Ms. OLSON. Right, right.
    Mr. PASCRELL. To people who greatly need it. We have not--
you know, we're state of the art--improved the state of the art 
to get to these people. I think that this is a very, very 
difficult--I would like to know, from the IRS, what they're 
going to do to address the most glaring problem here: 69 
percent in New Jersey, 67 percent across America. The next 
demographic group is 13 percent, and that's over 50, or 55, if 
I'm not mistaken.
    So, I don't know what you're going to do, but I would like 
to sure as heck know about that, and I'm sure everybody on this 
panel would like to know. Thank you, Mr. Chairman.
    Chairman LEWIS. Mr. Pascrell, I want to thank you for 
drawing attention to the number of people in New Jersey who 
have not filed.
    I noticed in the State of Georgia more than 167,000 have 
not filed. I want to thank you for bringing it to our 
    Now I recognize Mr. Tiberi for questioning.
    Mr. TIBERI. Thank you, Mr. Chairman. Thank you to you and 
to the other Chairman and to the Ranking Members for holding 
this hearing today.
    I agree with what Mr. Ramstad said, that 95, 96, 99 percent 
of what you are doing and what the IRS is doing is great.
    Let me tell you about something that I think is not so 
great, and get your thoughts on it. In your testimony, you 
acknowledge that the IRS did not make sufficiently clear that 
returns had to be processed by April 15th to be followed 
through to the schedule that's been posted, in terms of when 
people are going to get refunds.
    We have had probably between 50 and 60 individuals contact 
our local office, wondering what happened to their return. 
They're mostly seniors, they're mostly people who filed to get 
a paper refund, not an electronic transfer refund. Most of them 
we find out have filed close to or on April 15th. We didn't 
know, they didn't know, that they would be impacted by the date 
that they filed. So, there has been a lack of communication.
    Most of them have been resolved with going to the website 
and getting the new date. Not all of them have. In fact, 
Congressman La Tourette, also from Ohio, his office was told 
last week by an IRS official that, in fact, some of these 
people may not even get a rebate check because they may have 
filed wrong, which is a bizarre statement, in and of itself.
    One taxpayer I talked to Monday night, who was supposed to 
get a refund or a check on May 12th has been told--hasn't got 
any answers from the IRS, has been told by your office in Ohio, 
``Keep checking back with us on a weekly basis.''
    So, his question to me was, ``Who do I call when I can't 
get help with the advocate's office, and I can't get help with 
the IRS?'' That person happens to be my dad, who is pretty 
frustrated right now. He is not the only one. So, what do we 
tell our constituents who aren't getting any answers, who filed 
properly, and filed within the designated time that we all in 
Congress said you need to file b.
    Ms. OLSON. You have really highlighted a number of the 
issues that I have also tried to highlight in my testimony, the 
first being it's very difficult when you're trying to get a 
broad message out. ``We are going to get this payment to you. 
It is up to $600, $1,200, whatever,'' and then there are all 
these exceptions to the rules. ``File by April 15th,'' you 
know, but then we don't say, ``But you actually have to do it 
before, so we can process it by April 15th, so we can be on 
this schedule.'' Those are hard messages to get out.
    I have been told that the website only can give information 
about the status of your payment if it is 2 weeks, within 2 
weeks it's going to be issued. So, if you didn't file in order 
to be processed by April 15th, you're down there in the 
processing line, and your information may not be on the 
website. The website will say, ``No information at this time.''
    Mr. TIBERI. That's right.
    Ms. OLSON. When you call my employees, they are frustrated 
because they have no ability, unlike regular refund checks, to 
do a--cut a manual check, process your father's or any other 
taxpayer's account that has some kind of hardship need out of 
cycle, and get the payment to you. That is something we are not 
able to do with these economic stimulus payments, which is very 
frustrating for my employees, and obviously, for the taxpayers.
    So, all they can do is keep checking, themselves, the 
systems weekly to see when has your father's--or any 
taxpayer's--check posted to go out. We do not have the tools to 
expedite those payments.
    Mr. TIBERI. Do you have suggestions on how maybe the IRS 
can be helpful?
    Ms. OLSON. They are bound in the same way that we are. You 
know, I think that if the IRS had had more time, they could 
have programmed and, you know, maybe enabled us to be able to 
do manual checks, so that we could have overridden some 
systems. If we had had more time, we may have been able to 
program a better website that could give more information 
further on down the line, as far as estimates of what payments 
can come.
    But I think if you called any number at the IRS, if the 
payment isn't scheduled, everyone is going to give you the same 
    Mr. TIBERI. Have you heard what Mr. La Tourette's office 
was told by an IRS employee?
    Ms. OLSON. No. Do I want to?
    Mr. TIBERI. That if you filed incorrectly, that you may not 
get a stimulus check?
    Ms. OLSON. Oh. That surprises me. Again, that would be the 
thing that I would say that taxpayer needs to come to the 
Taxpayer Advocate Service, so that we can track down why--what 
the information was.
    I do know that we are getting some returns, duplicate 
returns, where a taxpayer--and this goes to the elderly 
population--which we saw this with taxpayers, they went to the 
VITA site, and they filed a 1040 on white paper. Then they got 
a mailing from us, where we had put the 1040 on pink paper, 
because we wanted them to see it, and they thought, well, now 
they need to send another one in, because they send a white one 
in first, so now they need to send a pink one in.
    If we get two of those returns, it's going to take some 
time. But we will resolve that issue. But it will delay the 
payment of the check, you know, the payout.
    So, there are a lot of different things that may have 
happened, but that's where maybe Taxpayer Advocate Service can 
be helpful, in tracking down----
    Mr. TIBERI. Okay.
    Ms. OLSON [continuing]. What the problem is, and fixing it.
    Mr. TIBERI. Thank you. Thank you, Mr. Chairman.
    Chairman LEWIS. I just want to remind Members that if you 
can, limit the question to 5 minutes so all Members will have 
an opportunity to get their questioning in. Mr. Pomeroy is now 
    Mr. POMEROY. Mr. Chairman, I note you make that admonition 
as I begin to inquire. Is that----
    Chairman LEWIS. Oh, no, I didn't mean that. It was not for 
you, Mr. Pomeroy. You know I would never do that to you.
    Mr. POMEROY. A couple of compliments to start the inquiry 
period. I have been very impressed with the new commissioner, 
Douglas Shulman, appreciate the IRS provided information about 
the take-up rate, especially with seniors, on the--or the SSA/
VA population that has filed.
    I also appreciate, once again, Ms. Olson and her leadership 
with the taxpayer advocacy office. I really do think that you 
play a very constructive role in improving the system, and 
advocating for taxpayers, just what Congress thought as they 
created our position. Congratulations on good work, once again.
    I notice that the IRS anticipated 6.8--it anticipated 14.5 
million ESP-only returns would be filed. Based on our staff's 
research as of May 31st, 6.8 million ESP-only returns filed. 
The IRS estimates in a letter from the commissioner that there 
is 5 million seniors in the SSA/VA population that have yet to 
    The break-out by states is really quite something. In North 
Dakota, it looks like remaining to file is 75 percent of its 
population age 65 and over. The numbers by state, also 
alarming: Ohio, 226,000; Wisconsin, 77,000; Michigan, 154,000; 
Massachusetts, 151,000. I mean, this goes on and one.
    I, by the way, will add this list to the record. I think it 
shows that we have work to do. I think that the IRS, SSA, 
Members of Congress, allied groups, getting the word out they 
can still file and get this information is extremely important.
    [The information follows:]
    Mr. POMEROY. I take general issue with my Social Security 
Chairman, relative to whether or not this is any business of 
SSA. I think when you get take-up rates falling so far short of 
the universe of eligible for stimulus, we need to be pretty 
open-minded about how we can make these systems work better.
    I certainly am one, as a senior Member on the Subcommittee 
on Social Security, open to any suggestions in this regard, 
including a greater role of SSA, provided, of course, it 
doesn't detract in any way--and I think this is the Chairman's 
concern--from their foremost mission. We would have to staff 
it, we would have to build systems that allow them to do it 
without interruption of the important work they do getting out 
these Social Security checks and reducing the backlog on 
disability determinations.
    Okay. On a portion of your testimony that has not been 
mentioned today involves the very unfortunately interaction 
with refund anticipation loans and the stimulus check. You 
know, I think refund anticipation loans are pretty much 
worthless. I would probably vote against them. I certainly have 
been concerned about our free-file alliance partners using 
relationships with the IRS to market what I think is an 
extraordinarily poor value to taxpayers.
    But I don't think anything brings out what poor value this 
is quite as much as the interaction on the early return, and 
let's talk about that for a minute.
    If I understand your testimony correctly, the way a RAL 
works is a temporary account is established, for the purpose of 
deposit to the account. So, for the almost 10 million taxpayers 
who purchased refund anticipation loans and 10.5 million who 
purchased refund anticipation checks, each of them had these 
special accounts created, and that was related to their filing. 
Am I correct so far?
    Ms. OLSON. Yes.
    Mr. POMEROY. Now, this account goes away when they get 
their refund anticipation check. So, it's not an account the 
IRS can use for an electronic deposit.
    Ms. OLSON. Correct.
    Mr. POMEROY. So, the only way anyone who got a refund 
anticipation loan gets a stimulus check is by a paper check 
mailed out.
    Ms. OLSON. By a paper check, that's correct.
    Mr. POMEROY. So, let me just put this straight. Some of 
these people going to--some taxpayers, like millions, going to 
tax preparers that are hawking not just tax preparation 
services, but these side products like refund anticipation 
loans, knew at the time they were selling the refund 
anticipation loan to the taxpayer, that it would cause a two to 
two-and-a-half month delay in their receipt of the stimulus 
    Ms. OLSON. In the--since the law was enacted in February, 
we would have known very quickly that we wouldn't be able--they 
wouldn't be getting a direct deposit.
    Mr. POMEROY. That's right.
    Ms. OLSON. They would be getting a check, yes.
    Mr. POMEROY. Let's face it, the bulk of the--the bulk of 
taxpayer business is, let's say, March 15th to April 15th.
    Ms. OLSON. After the first wave, after the January 15th to 
February. We would have missed the first wave.
    Mr. POMEROY. Missed the first wave, but this last wave, 
which is substantial----
    Ms. OLSON. Right.
    Mr. POMEROY. I will try and hurry, Mr. Chairman. The last 
wave, which is very substantial----
    Ms. OLSON. Yes.
    Mr. POMEROY [continuing]. Comes in to a tax preparer. They 
are so desperately in need of cash, they're taking a poor value 
RAL. The person selling the RAL knows, you know, ``Okay, we 
will get you money right away on your tax return,'' and what 
they fail to tell them, I expect, in each and every instance 
was it would cause a two-and-a-half month delay in receipt of 
the economic stimulus check.
    Ms. OLSON. That's the effect.
    Mr. POMEROY. So, they paid good money to get their refund 
early, or their refund immediately, only to lose two-and-a-half 
months in access to the economic stimulus check.
    In my opinion, tax preparers have a relationship with the 
taxpayer. That includes a fiduciary responsibility, or 
something like it, in my own mind. Maybe I am being naive about 
representing the best interests of the taxpayer that is 
entrusting them to prepare the return. Not providing 
information that they're going to delay receipt of the stimulus 
check by two-and-a-half months when they purchase at high 
value, relative to the refund, these refund anticipation loans 
in my opinion, it's very, very shoddy work by this industry, 
and they include some of the best known tax prepares in our 
    Ten million taxpayers on refund anticipation loans, another 
ten million on refund anticipation checks. That's 20 million 
people, or 20 million filers are going to be delayed in getting 
their stimulus check because it took refund anticipation loans. 
That is one sorry statement on what I think is a very 
insufficient industry. I yield back.
    Chairman LEWIS. The gentlewoman from Pennsylvania is now 
recognized for her questioning.
    Ms. SCHWARTZ. Thank you, Mr. Chairman, and I appreciate 
this. I also want to start out by saying that I think a lot of 
good work has gone on, and on all of our behalf, to get this 
information out to tax filers, particularly to seniors.
    In my own office--and I personally went to a number of 
senior centers and retirement communities, and I got great 
cooperation from the IRS, they sent someone out with forms. My 
own experience in doing this is that there were a lot of people 
who were concerned about--just as you pointed out--about filing 
a form with the IRS they had not had any relationship with for 
a while. My sense was that some of them were ready to do it, 
and some of them were not. That really speaks to a need to do 
this in a somewhat different way.
    To say to people, ``You need to fill out this form. It's a 
different color, you've never done it, you won't have to pay 
any income taxes, don't worry about it, the IRS isn't coming 
after you'' is not something that, you know, a lot of Americans 
would take to, and particularly--and I'm interested--you know, 
when you see all the numbers broken down by 65 and older.
    My question at this point is are they really the 80-year-
old and older who are not filing this form, that were more 
concerned about it, their skills, their ability to do that? 
Certainly the discussion about use of the computer, just go on 
the website--I want you to know my mother-in-law is a really 
active 82-year-old, and she is--hates a computer.
    Ms. OLSON. Yes.
    Ms. SCHWARTZ. You know, and she hates those automatic dial 
things, too. You know, she wants to talk to a real person.
    But--and even suggesting that they should just come in to 
an IRS center is completely--just not realistic, not at all 
    So, the question I have is what do we do, going forward, 
how do we actually really make it easier. I heard what you were 
saying earlier, about the possibility of some more automatic 
data transfer. Of course, even having seniors over 70 or 80 or 
85, maybe even 90 say, ``Oh, just make it debit card,'' you 
know, there are a lot of older folks who don't believe in debit 
cards. They think that that's kind of the way we've gotten into 
trouble in this country----
    Ms. OLSON. Right.
    Ms. SCHWARTZ [continuing]. Too many young people living off 
of debit cards, maybe.
    Ms. OLSON. Right.
    Ms. SCHWARTZ. But--and credit cards. So, really, the issue 
for me is how can we streamline this process now? We have spent 
$300 million to get this information out. We still have, in 
some cases in Pennsylvania, 25 percent of the seniors eligible 
not yet having received it. They only have until October 15th 
to file. They're probably going to be not just that much 
clearer about it, going forward.
    So, I really want you to answer how----
    Ms. OLSON. Right.
    Ms. SCHWARTZ [continuing]. A little more specifically----
    Ms. OLSON. Right, right.
    Ms. SCHWARTZ [continuing]. How we can have these agencies 
work more----
    Ms. OLSON. Right, right.
    Ms. SCHWARTZ [continuing]. Cooperatively. They've been 
working cooperatively; I'm not looking to say----
    Ms. OLSON. Right, right.
    Ms. SCHWARTZ [continuing]. What they have done is not 
    Ms. OLSON. Right.
    Ms. SCHWARTZ. But it seems to me it's got to be easier to 
do a data transfer between the IRS knowing who has actually 
filed and who hasn't, who can be reached out to, who can get a 
letter, who can't, by an exchange of data. Is that happening?
    What other kinds of outreach efforts are going into, very 
specifically, reaching out to what I would suspect are the 
really more senior seniors.
    Ms. OLSON. Right.
    Ms. SCHWARTZ. That's just a suspicion on my part. If that's 
not correct, I would like to know it, too. But how can we 
actually reach them----
    Ms. OLSON. Right.
    Ms. SCHWARTZ [continuing]. So that they get the dollars we 
anticipated they--and get it soon enough. Because the idea of 
this was twofold: to help people who were struggling, 
economically; and two, it was to stimulate the economy. This is 
next year; that isn't what we meant. We really wanted this to 
get out in 3 months.
    So, could you speak to those several issues?
    Ms. OLSON. Yes.
    Ms. SCHWARTZ. It would be very helpful.
    Ms. OLSON. The first thing I want to make clear is that I 
am not in any way criticizing the cooperation between the 
Agency that has occurred to date or the IRS' outreach attempts 
to date, because I think they have done an extraordinary job. I 
said that in my testimony, and I honestly mean that.
    My comments about the--you know, the data exchange, are 
really looking at it on a going forward basis. I don't know 
whether between now and October 15th, we can take the 
population that we know did not file a return in 2006 or 2007, 
and our own Social Security's and VA's rolls, and then just 
look and see whether any of them got Social Security or VA 
benefits, you know, up to--you know, over $3,000, and then just 
try to get them a payment somehow, not ask them to file the 
    Ms. SCHWARTZ. Right.
    Ms. OLSON. I think that would require a legislative change. 
I was mainly making that point on the basis of going forward 
and writing different legislation, if we were to do this again.
    Now, that might mean if we can identify those people, those 
are the ones that we're targeting for additional, person-to-
person outreach, perhaps, you know, by the IRS, you know, folks 
like that.
    Now, I do think that the biggest effort that we can make 
now between now and October 15th is to work locally, that we 
know how many people aren't--haven't filed in each state; we 
have some rough numbers of that--and that the IRS--as it has 
been doing, but even more so--with the Taxpayer Advocate 
Service and with Social Security and with low-income taxpayer 
clinics and other non-profit groups, go out to senior citizen 
    Ms. SCHWARTZ. Right.
    Ms. OLSON [continuing]. Go out to synagogues, churches, 
everywhere, and, person to person, you know, reach out to these 
    Ms. SCHWARTZ. It's pretty labor intensive. I mean, but 
you're saying right now----
    Ms. OLSON. It is labor intensive----
    Ms. SCHWARTZ [continuing]. The way we passed it, we 
prohibited automatic----
    Ms. OLSON. Yes.
    Ms. SCHWARTZ. Doing that automatically?
    Ms. OLSON. But I do think you can leverage----
    Ms. SCHWARTZ. I think that is something we should 
definitely look at, going forward----
    Ms. OLSON [continuing]. Your networks. The IRS knows a lot 
of organizations. My employees do 40 grass roots outreaches a 
year. If those 40 do a grass roots outreach themselves, you can 
really get out there. We just have to keep doing that.
    We will never get all of them, though, for all the reasons 
I identified in my testimony.
    Ms. SCHWARTZ. Again, I would just saying going forward I 
believe we ought to look at that. Again, I was not suggesting 
that either, you know, SSA or IRS have not done all that they 
could. But I think we are just--you know, we still are making 
it very labor intensive----
    Ms. OLSON. I agree.
    Ms. SCHWARTZ [continuing]. Very difficult to reach out to a 
not-so-easy population, necessarily----
    Ms. OLSON. I agree.
    Ms. SCHWARTZ [continuing]. To reach out to. Some of these 
numbers--that's not the purpose of this hearing--is that there 
are also many people under 65, or not on SSA, who haven't filed 
either, or haven't gotten it either.
    Ms. OLSON. Yes.
    Ms. SCHWARTZ. We know those people, we could write to them. 
We could make it simpler.
    But, going forward, it seems that we have--we know who 
these people are. We have got to figure out a way to reach out 
to them and do it more automatically, be able to get, if not 
those checks, maybe automatic deposit to them.
    So, I appreciate your recommendations going forward, and 
some of these questions would apply, I think, to the next panel 
as well. Thank you.
    Chairman LEWIS. The other gentleman from New York, Mr. 
Crowley, is recognized.
    Mr. CROWLEY. I thank the Chairman, and thank you. It's also 
good to see you again. Welcome back to the Committee.
    Ms. OLSON. Thank you.
    Mr. CROWLEY. I have appreciated the questions, so far, or 
the observations of the panel and your responses, as well.
    I have done a good deal of outreach myself to my 
constituency in a number of ways, to try to elevate the 
attention to the rebate, the stimulus checks.
    We have seen from the IRS data that has been presented to 
us that in New York State alone, some 440,000 New Yorkers have 
yet to file for their rebate check, like veterans retired and 
Social Security recipients have not filed for those checks. I 
know the outreach that's been done by the IRS, as I say, and 
the private, but I would like to know from you, if you could 
comment, on what you think has been the most successful and 
what has not worked.
    Has the AARP mailers been successful, in your view? Will 
the Super Saturdays--in my district, in parts of the Bronx, I 
know they were holding Super Saturdays to help catch the people 
we were hoping that would--they would get a hold of.
    What do you recommend that take place, or to help get this 
big number? I mean, this is still----
    Ms. OLSON. Right, yes. It's a big number, yes.
    Mr. CROWLEY. Also, what could we, as Members of Congress--
    Ms. OLSON. Right, right.
    Mr. CROWLEY [continuing]. Be doing to help?
    Ms. OLSON. Well, I think that the Super Saturdays were 
enormously successful. I think because it was a partnership 
with the IRS, with non-profit groups, with the congressional 
offices, you know, we really got attention on that, we brought 
people in.
    I think, if anything, we need to do another Super Saturday. 
More importantly, we really need to think about how we bring 
this to the individual, because some of these folks are bed-
ridden, not able to get to the site, but they can--they 
normally might get to a senior citizen center during the week.
    You know, so can we do a Super Saturday or Super Wednesday 
at the senior citizens center in a community? I think the 
congressional offices can help sponsor some of those events, or 
publicize them, and also maybe overcome the concern that some 
people may have about the IRS doing it, because it's coming 
from the congressional office and it's in a site that the 
individual is familiar with, their senior center, you know, 
    I think that that is--the IRS does have employees who work 
those issues, and I think they need to just be given free reign 
and the funding to be able to do those kinds of events. My own 
employees are continuing to do those events throughout--until 
October 15th.
    I am concerned we do have some of the VITA sites still 
open, the volunteer income tax centers, assistance centers, but 
there are not very many of them. There are only about 64 or so 
that are open between now and October 15th. In New York, for 
example, none of them are open in Manhattan or the Bronx, you 
know, so you've got this large population and we don't have the 
    Mr. CROWLEY. So, the poorest populations in the city, as 
    Ms. OLSON. Yes. I fear that, you know, we really--we need 
to give support to these volunteers so that they will stay 
    Mr. CROWLEY. I say that because 8 out of 10--8 out of the 
top 100 zip codes----
    Ms. OLSON. Yes.
    Mr. CROWLEY [continuing]. Are in part or in whole in my 
district in Bronx and Queens.
    Ms. OLSON. Yes.
    Mr. CROWLEY. So, this is something we really want to 
    If I could just switch gears for a moment--I appreciate 
your response, and we're going to continue to work on this, and 
I would suggest to my colleagues we all need to look at this in 
ways in which we can be helpful, in terms of getting this 
message out--if I could just go back to Mr. Pomeroy's question 
to some degree, and he talked about a different subject matter, 
in terms of abuse.
    I just want to bring it back to--and see if you're hearing 
some of these same abuses that we're hearing about, and that 
includes we've heard reports of some abusive practices by 
private tax preparers overcharging, or gouging, on normal non-
filers with high costs to get the rebate, including some 
charging some taxpayers up to $200 on a $300 rebate.
    What, if anything, can be done to reign these practices, if 
they are going on, in? Is there something the IRS can do 
through regulation, or we, in Congress, can do through 
    Ms. OLSON. Well, I have--I think there is a multi-pronged 
approach to this. One is just the simple outreach that, you 
know, ``You shouldn't be paying these fees. Look out for 
outrageous fees.''
    But I have recommended since 2001 that the--that Congress 
pass a bill to regulate return preparation, so that people who 
are return preparers are professionals, as opposed to just 
simply being in the business to get fees, you know, and sell 
products like refund anticipation loans, and things like that, 
that there is some professionalism put back into that.
    Then, coupled with that, then, the IRS needs to go out and 
do these due diligence visits, and look at things that are 
disproportionate, in terms of fees. That's a very difficult 
issue, but the IRS needs to tackle that head on. I have been 
after the IRS for--ever since I've been on this job, and even 
before then, to get them to do this.
    Mr. CROWLEY. Thank you, Ms. Olson. Thank you, Mr. Chairman.
    Chairman LEWIS. The gentlewoman from Ohio is recognized.
    Ms. TUBBS JONES. Everything is going off, okay, except 
economic stimulus, anyway.
    Ms. Olson, talk to me for a moment about your own office, 
and your ability to handle the onslaught of work that comes as 
a result of these alleged stimulus checks, and the processing.
    Ms. OLSON. Well, I can tell you that when people can't get 
through on the phone lines because of the level of service and 
the number of--the volume of calls that the IRS is just 
getting--and I'm not being critical of the IRS here, it's just 
a fact, a reality----
    Ms. TUBBS JONES. We understand that. Just say what you want 
to say.
    Ms. OLSON. But my people----
    Ms. TUBBS JONES. You can be critical if you want to.
    Ms. OLSON. I had a--yes, I know, believe me, I will be 
critical when I want to be critical, you know, when I need to 
    But I have a four-person office in West Virginia. On 1 day 
they got 86 economic stimulus calls. If you think about that, 
that's 20 calls a day per person, plus they have a workload of 
about 42 cases per person at any given time. So, no work is 
getting done in that office, if they're needing to talk through 
these concerns with individuals and reassure them and help 
    The calls are enormous to us, as well. We have gotten, 
since the beginning of the year, about--over 3,500--about 3,500 
cases dealing with economic stimulus. Just this past week we 
got 300 of them. So, they're--just since Monday we got 300 more 
cases in the Taxpayer Advocate Service dealing with problems 
with the economic stimulus--not calls, but cases.
    So, it just comes on and on, and I think they're just some 
of the kind of things where things have gotten messed up, or 
people don't know where their payment is, or there is--maybe 
there is identity theft in them.
    Some of them are injured spouse cases where there is a debt 
that one spouse owes, and we're going to grab one-half of the 
economic stimulus payment to pay back that debt, but the other 
half should go out to the other spouse, who is not a debtor on 
the debt. But the IRS systems aren't doing that consistently, 
so the taxpayer won't get their payment, and we have to get in 
there and get that payment.
    Ms. TUBBS JONES. I will say this. If I had known then what 
I know now, using that as a step toward processing, what would 
you--give me two recommendations.
    Ms. OLSON. Well, one would be I would really take the 
lessons that we have learned from this and come to terms with 
it's better to get the money out to as many people as we can 
who are entitled to it, and tolerate getting some of the money 
out to people who maybe, you know, they have debts to the IRS, 
or you know, to child support or something. Let's just get the 
money out there. Don't put so many exceptions into the rules, 
you know, things like that. Tolerate some payments to people 
that we wouldn't necessarily ordinarily give refunds to, but 
allow it so that we can get the money out there, if that's the 
    Because I think the biggest problem with the economic 
stimulus payment is we have got this general statement saying, 
``Everybody is going to get their economic stimulus payment, 
except you and you and you and you and you and you and you, and 
then there are special rules for you, over here, and there are 
special rules for you, over here.''
    Ms. TUBBS JONES. Only time will tell us whether it has 
really been stimulus.
    Ms. OLSON. That is just a disaster for----
    Ms. TUBBS JONES. The dollars that we have expended in 
attempting to use it, to make it a stimulus, and in addition to 
which, dollars that could well have been put to use that might 
have made it better for Americans across the board versus 
throwing it so that we could spend it at Wal-Mart, K-Mart, or 
    But what else would you like to tell me, Ms. Olson, in 
terms of second thing that if you knew then what you know now?
    Ms. OLSON. Well, I do think we should do what I have 
suggested before, which is try to figure out a way to get 
automatic payments out to the population that already isn't 
part of the IRS, the Social Security recipients, the Veterans 
Administration recipients, you know, who are not filing with 
the IRS.
    Ms. TUBBS JONES. Would you have suggested, then, that that 
had been their responsibility, versus the IRS, or we should 
    Ms. OLSON. Well, again, I want that to be explored more, 
but I really view that the two agencies, between the two of 
them, should be able to identify who in that population was 
eligible for the payment, and then we should have figured out a 
way to get it out to them, rather than asking them to file a 
return, you know, and come in, and do some affirmative act and 
get it.
    I think that's a problem with that population. It's asking 
too much of them. So it doesn't surprise me that we're not 
getting the pick-up from that population, you know, that we 
might have hoped for.
    Ms. TUBBS JONES. Then a lot of people said, ``To heck with 
spending that money, I'm going to put it away, because I could 
use it for something more important to me than going to a store 
and buying some immediate piece of whatever,'' in terms of 
    Ms. OLSON. I am just worried about getting the money out to 
them. I don't know what they're doing, once they get it.
    Ms. TUBBS JONES. I feel you. Thank you. I yield back the 
balance of my time.
    Chairman LEWIS. Mr. Kind is now recognized for his 
    Mr. KIND. Thank you, Mr. Chairman. I want to thank you for 
holding this important hearing. Ms. Olson, you have been very 
generous and very kind with your time here today.
    I would agree with your last statement. I think the 
greatest obstacle that we have for the non-filers, those who 
we're trying to do our best to reach out to right now, is 
inertia, trying to get them to take some type of step so that 
they get into the system, and then qualify for the stimulus 
    But let me just redirect you on a different line of 
questioning. My pet peeve--and I expressed this earlier in the 
year, too, when we had an earlier hearing--was the tremendous 
amount of money that's being spent on not one, but two 
notifications to tax filers in the country. According to our 
calculations, it wasn't just one notice, pre-filing notice, but 
also a second notice that went out, close to $100 million in 
just those 2 notices.
    So, $1 out of every $16 that's going out for stimulus is 
going out or being used for basic notification purposes, going 
to traditional filers, the vast majority of whom filed in the 
past, are going to file again, will get automatic stimulus 
checks, based on what they file. The vast majority of them 
aren't going to be contacting the IRS for additional 
    I understand the importance of outreach and notification, 
especially for the non-filers out there, and the job we have to 
do. I just don't want to be critical of the IRS or what we are 
giving the IRS direction to do, because I think they've been 
doing an incredible job, as far as turnaround time with not 
only the stimulus, but with AMT late last year--and hopefully 
we're going to be able to avoid a late AMT fix for the next 
fiscal year, and avoid that box.
    Ms. OLSON. Thank you.
    Mr. KIND. But I would like to, you know, in the future, 
with lessons learned with this latest stimulus, perhaps work 
with you and others----
    Ms. OLSON. Right.
    Mr. KIND [continuing]. To see if there is a way we can 
tighten up the notification----
    Ms. OLSON. Right, right.
    Mr. KIND [continuing]. For these stimulus measures, so it's 
not just a broad----
    Ms. OLSON. Right, right.
    Mr. KIND [continuing]. Overreach, and I think a lot of 
redundancy out there----
    Ms. OLSON. Right, right.
    Mr. KIND [continuing]. And perhaps find some taxpayer 
savings at the end of the day, while still getting to that 
harder-to-reach community----
    Ms. OLSON. Right.
    Mr. KIND [continuing]. That we want to reach out to right 
now, who traditionally wouldn't file. That's where most of the 
focus has been.
    I know the IRS has been inundated yet again from questions 
coming in. But my guess is that it's not the majority of those 
who are receiving notification, the traditional filers, and 
they basically have to do what they have always done in the 
past. So, maybe there is a way of being able to tighten that 
up, and with suggestions that you're offering today too, have a 
better outreach with those harder-to-reach individuals.
    But, you know, I was never a great fan with the whole 
stimulus idea to begin with. The thought of borrowing $160 
billion from China to give to people to fill up their gas tank 
and sending the dollars to--it didn't really seem like it was 
going to have much of a stimulus impact.
    But this past week I have been back home, battling flood 
waters with many of my constituents and communities in southern 
Wisconsin, and I know that this, the timing of the stimulus, is 
going to be welcome, whether it's $600 or $1,200, whatever they 
get, in trying to help them get back on their feet. So, in that 
respect, I know a lot of people have been struggling to make 
ends meet right now. This little bit, as far as the stimulus 
measure, can go a long ways to helping that take place.
    But if you have any ideas, as far as outreach and 
notification that might save us money and have a little more 
targeted version, we would be interested to know.
    Ms. OLSON. Well, Sir, I think one thing that the IRS has to 
do is we have had a--if you look at this as a grand experiment, 
we have had a real opportunity to learn a lot about how to 
communicate with taxpayers as a whole, and with hard-to-reach 
populations, in particular. What we really need to do is not 
after this is over--you know, ``over'' in quotations--we have 
to sit down even now, and then on an ongoing basis, and say, 
``What have we learned, and what is better?''
    I know that the IRS wanted to do those mailings in the 
first place, based on its experience with the last tax rebate 
    Mr. KIND. Right.
    Ms. OLSON [continuing]. 2001, hoping to fend people away 
from the phones. But I think the complexity of the message was 
so great, and the contacts just generated so very early, and 
people--you know, the message was, ``You're going to get your 
money,'' and people were like, ``When can we get the money,'' 
and they were going to pick up the phone and call.
    I think we just really have to study how we deliver a 
message like that, where we deliver it, who delivers it, and at 
what level, whether it's national or, you know, area, or local 
community, and what is the best way to get out what parts of 
the message. I think we've got lots of data in which to learn 
from this experience.
    Mr. KIND. Right.
    Ms. OLSON. I will certainly be studying it.
    Mr. KIND. Right. Thank you very much. Thank you, Mr. 
    Chairman LEWIS. Thank you. Mr. Neal is now recognized for 
his questioning. Congratulations, Mr. Neal, on Boston winning.
    Mr. NEAL. I appreciate that.
    Chairman LEWIS. I know you're not from Boston.
    Mr. NEAL. I played----
    Chairman LEWIS. I know you represent the home of----
    Mr. NEAL. But I did play a heck of a game.
    Chairman LEWIS. You represent the home of the beginning of 
basketball, Springfield, right?
    Mr. NEAL. It's true. It's nice to return that trophy to 
where it belongs.
    Paper correspondence. Crisis proportions yet?
    Ms. OLSON. I think it is in crisis proportions. I think, 
you know, once we get through October 15th with the stimulus, 
we're going to be dealing with the fall-out from what has 
happened to the IRS in handling these calls into the next 
filing season.
    Mr. NEAL. What does that mean to the taxpayer, Ms. Olson?
    Ms. OLSON. Well, for the taxpayer, if someone writes in--
gets a notice from the IRS--let's just give a simple example--
saying, ``We see that there is a 1099 on your return, a W2 that 
you forgot to list on your return,'' and that taxpayer is a 
victim of identity theft, it's somebody else's information, the 
taxpayer writes back saying, ``No, no, no, this is not mine,'' 
if we don't get that correspondence to the person who is 
working that case, that person, that IRS employee, is not going 
to know that there is another explanation, and they're going to 
go ahead and assess the tax against that taxpayer, and the next 
thing the taxpayer knows is that they're either going to have 
to go to Tax Court, or request an audit reconsideration, or 
they may be in the collection arena.
    Mr. NEAL. Thank you. Thank you very much, Mr. Chairman, for 
that skill in getting my question in and promoting the Celtics, 
and a reminder that that championship trophy, the Lawrence 
O'Brien Trophy, is named for a son of Springfield. Thank you, 
Mr. Chairman.
    Chairman LEWIS. My pleasure, very delighted. Mr. White, Ms. 
Olson, I want to thank you for your testimony, for being here 
today. We look forward to working with you to reach taxpayers 
who have not filed a rebate check. Thank you for your good 
    The Committee will recess for a half-an-hour. We have a 
series of votes on the floor.
    [Recess from 11:34 a.m. to 12:14 p.m.]
    Mr. MCNULTY [presiding]. The hearing will come to order. 
Chairman Lewis has another commitment at the present time, and 
we hope and expect he will be back at some point during the 
testimony of the second panel. In the meantime, he has asked me 
to reconvene the two Subcommittees.
    I want to welcome both of the commissioners for being here, 
and for the tremendous job that they are doing for our 
constituents all over the country. I would remind both 
commissioners that your entire statement will appear in the 
record. We ask you to try to summarize, if possible, within 5 
minutes, so that we can get as many questions as possible.
    It is now my pleasure to introduce the commissioner of the 
Internal Revenue Service, Douglas Shulman.


    Mr. SHULMAN. Good morning, Chairman McNulty, Mr. Pascrell, 
Mr. Brady. This is my first appearance before Ways and Means. I 
am two-and-a-half months into a 5-year term. I have gotten to 
speak with a number of Members individually, and I am looking 
forward to working with all of you while I am here.
    As you know, I am here today to discuss the economic 
stimulus legislation enacted by Congress last year. The 
responsibility for distributing this one-time payment to 
taxpayers was assigned to the IRS right in the middle of filing 
season, which is our busiest time of year. Nevertheless, we 
understood that the point of the economic stimulus was to 
provide a stimulus to the economy, and so we tried to balance 
getting the checks out as quickly as possible with some of the 
operational realities of doing so.
    I would also just like--before I say a few words about the 
progress--just to recognize my colleagues from the Social 
Security Administration, the Department of Veterans' Affairs, 
as well as my colleagues at the Financial Management Service, 
who are responsible for actually distributing the checks, once 
we identified the amount, et cetera. The support in partnership 
was phenomenal. I think it's a model of how the Federal 
Government--at least I would hope--would work.
    As of June 13th, we have distributed $63.8 billion in 
stimulus payments to over 76 million taxpayers. I am proud to 
report that the first stimulus payment was direct deposited 
into a taxpayer's account a mere 70 calendar days after the 
stimulus legislation was enacted. I will tell you I came in the 
middle of this, I started March 24th. I have 3 meetings a week 
with the 40 people most responsible for stimulus, from 
technology to operations to customer service to compliance, and 
it's really been a phenomenal job. I am quite proud of the 
people of the IRS who made this happen.
    In addition, outreach was incredibly important. As a 
general matter, we tried to publicize that all you needed to do 
was file a tax return to get your stimulus payment. We also 
paid special attention to the potentially 20 million people who 
usually don't file a tax return, but needed to file a tax 
return this year to receive their economic stimulus payment.
    We partnered with AARP and the United Way, just to name a 
few. We ran what you've already talked about, Super Saturday. 
We opened 320 of our sites and 400 partner sites to seniors, 
veterans, and low-income workers, to come in and get their 
stimulus payment--by filing their stimulus return. We worked 
very hard to spread the word.
    As you know, as the nation's tax administrator, we did not 
start this process with a master list of those Social Security 
and veterans beneficiaries who are eligible for stimulus 
payments but usually don't file a return. Nonetheless, through 
our outreach, I am pleased to say that, as of now, we have 
accounted for 15 million out of the 20 million people who we 
thought might be eligible.
    I do want to correct the record. I know a previous witness 
said that we had found seven million people. We have actually 
accounted for 15 million. They have either filed for 
themselves, or they're listed on somebody else's return.
    While this is good progress, we also recognize that there 
is more work to be done. So we've planned an outreach campaign 
for this summer. We're going to entitle it, ``It's Not Too Late 
to File.''
    Today, we are distributing to your offices and offices of 
other Members of Congress a packet that will give you detailed 
demographic information about who in your District might be 
eligible to file a return and hasn't yet filed. We would love 
to partner with Members of both Subcommittees to try to do 
outreach and get more people into the system.
    We are also going to send another mailing. We're going to 
do more media. Just this afternoon, we have a conference call 
with 50 Spanish language media outlets to try to promote to 
people who haven't yet filed that they can still get a stimulus 
    Let me just give you a couple of on-the-ground observations 
from stimulus program. I have been visiting our taxpayer 
assistance centers, and our phone centers, during this time. 
Any undertaking that is this large and complex is certainly not 
going to be error free. We currently estimate, though, that 
over 99 percent of people eligible for stimulus who have filed 
their tax return are on schedule to get their stimulus payment 
on time with no issues and no problems.
    To give you a sense of, when issues occur, how we're trying 
to attack them, let me just talk about the child tax credit 
issue that emerged. We found out about a month ago that there 
were taxpayers who didn't check the box correctly on their tax 
return, saying that they were eligible for child tax credit, 
and therefore, weren't getting their stimulus child tax credit.
    We also found there were some software vendors who had a 
glitch in their program. When returns came in to us, they came 
in improperly, and so people weren't getting their child care--
weren't getting credit for dependent children for their 
stimulus returns.
    Under normal circumstances in tax administration, we would 
say either the taxpayer didn't do it right, or the software 
vendor didn't do it right, and so we would send it back to the 
taxpayer and we would say, ``File correctly''. They would need 
to file correctly to get their stimulus payment.
    Because we know it's so important that we go the extra mile 
with these people--about 230,000--we actually now are 
correcting their return for them, correcting the error that 
either the software provider or the taxpayer made, running a 
batch of new stimulus checks, and in July those people will get 
the extra $300 per child that they were due under stimulus. 
That's the kind of thing we're trying to do, is be creative and 
be very aggressive in making sure we fix problems as we see 
    I'd be happy to answer questions. As you know, our phones 
have gotten quite overloaded, and we have worked hard to manage 
our resources against those. We are using the same people to 
run the stimulus program as run filing season. We're doing the 
late AMT fixes to get ready for filing season. So, this hasn't 
been the easiest undertaking for the IRS, but I'm quite proud 
of the work we have done, and I'm happy to answer any 
    [The prepared statement of Honorable Mr. Shulman follows:]
  Statement of The Honorable Douglas H. Shulman, Commissioner of the 
                        Internal Revenue Service









    Mr. MCNULTY. Thank you, Commissioner Shulman.
    I am now pleased to welcome Social Security's Deputy 
Commissioner for Operations, Linda McMahon.


    Ms. MCMAHON. Thank you, Mr. Chairman and Members. On behalf 
of Commissioner Astrue, I appreciate the opportunity to testify 
before you regarding the Social Security Administration's (SSA) 
efforts to help implement the Economic Stimulus Act of 2008. I 
would like to explain what we have done in support of IRS to 
provide stimulus payments, including our substantial outreach 
efforts, and how we have used the funding that Congress 
provided for this purpose.
    The President and Congress took swift action to provide 
targeted, immediate financial assistance to individuals and 
families across the country. It was with that same sense of 
urgency that SSA worked closely with IRS to develop a process 
that would ensure prompt delivery of stimulus payments to 
eligible Social Security beneficiaries.
    Our initial challenge was to provide IRS with the data they 
needed to inform Social Security and the Department of Veteran 
Affairs (VA) beneficiaries that they had to file a tax return 
in 2007 if they hadn't filed one in 2006, in order to receive 
the stimulus payments. We already had systems in place to 
deliver Social Security data to IRS, but the VA lacked the 
systems capacity to match its beneficiaries against IRS 
    To work around this problem, SSA added the 2.6 million VA 
names to our own listing of Social Security beneficiaries, 
eliminated most duplicates, and then forwarded a single file of 
55.5 million names and addresses of VA and Social Security 
beneficiaries to IRS.
    We also worked with IRS to develop a simplified packet of 
information that would be understandable for our beneficiaries, 
and provide step-by-step instructions on how to file a return 
and qualify for the stimulus payment. The packet included 
instructions, forms, and even a postage-paid return envelope.
    IRS matched the names that we sent them against their 
files, identifying approximately 21 million VA and Social 
Security beneficiaries in the United States who did not file a 
tax return in 2006, and mailed the informative stimulus packets 
to them. We understand from IRS that--and I think you've heard 
it here--that this streamline process is leading to a 
significant response rate. Everybody wants 100 percent, but 
believe me, in these kinds of programs, 75 percent is 
    The targeted mailing was a vital step in ensuring our 
beneficiaries received information about their eligibility for 
a stimulus payment.
    But we didn't stop there. We placed a prominent link on 
both our English and Spanish Internet homepages, directing 
individuals to the IRS website, and the information there on 
the stimulus payment.
    We utilized e-mail, sending a message about the stimulus 
payments to nearly 800,000 individuals who are signed up to 
receive Social Security-related news.
    We worked with IRS to create a stimulus payment flyer that 
specifically targeted Social Security beneficiaries. We then 
printed more than 1.6 million of these flyers in English and in 
Spanish for our field offices to distribute to visitors.
    We worked with advocacy groups at the national level and in 
local communities, sharing copies of the flyer with them.
    Across the country, in hundreds of speeches and other 
Social Security-related events, SSA employees have provided 
information and answered questions about the stimulus payment.
    In addition, our Regional Communications staff has joined 
IRS professionals in outreach events.
    Also, every caller to our National toll-free 800 number 
receives an up front message about the stimulus payment. Our 
toll-free number has received nearly 27 million calls since 
that message was placed online, and every one of those calls 
presents another opportunity to tell people about eligibility 
for the stimulus payment.
    Turning to budget issues, as a part of the Economic 
Stimulus Act, Congress provided SSA with an appropriation of 
$31 million. So, far, we have obligated $18 million of those 
funds. We have spent about $6.4 million on printing and 
postage--actually, for the notice that IRS sent out to our 
beneficiaries--approximately $10 million answering beneficiary 
inquiries and providing replacement 1099s, and $1.4 million on 
training and required systems work.
    We were actually able to reduce some of the anticipated 
costs by working with IRS on a simplified method of processing 
stimulus payment tax returns. For example, at our suggestion, 
IRS ruled that individuals could estimate the amount of Social 
Security benefits received, reducing the need for SSA to 
replace 1099s.
    While many Social Security beneficiaries have already filed 
the necessary forms to receive a stimulus payment, we know 
there are still some individuals who have not responded to the 
first mailing. We will continue our efforts to reach these 
individuals through the means that I have already described, 
and working with IRS.
    In conclusion, I thank you for the opportunity to share 
what we have done, in collaboration with other Agencies, under 
the leadership of the IRS, to facilitate the economic stimulus 
payments. Together we have made great strides, and I am 
especially pleased that, so far, we have been able to make this 
progress in a manner that has not threatened SSA's core 
    I also will be glad to answer any questions.
    [The prepared statement of Ms. McMahon follows:]
   Statement of Linda McMahon, Social Security Administration Deputy 
                      Commissioner for Operations







    Mr. MCNULTY. I thank both of you for your testimony. I 
thank you for the job that you have done so far, under the 
difficult circumstances, especially in the middle of the tax 
    But we still have five million people to get to. That's a 
lot of people. We want to get as close to 100 percent as we 
possibly can. So, I want to commend you for the outreach 
efforts you have made so far, and the renewed efforts that you 
talked about today.
    We are going to try to help with that. Chairman Lewis and 
I, along with Ranking Members Ramstad and Johnson are sending a 
letter to all Members of the House of Representatives, asking 
them to include in their newsletters, press releases, press 
statements, press events, and so on back in their home 
district, information about how to get the proper paperwork 
filed so that we can help you along with getting the word out 
and getting these checks to as many people as possible.
    The one question I would like--issue I would like an update 
on is, you know, when you do the outreach, a lot of times you 
increase the number of phone calls that come in, and I know 
that has been overwhelming. We might need a little bit more 
help with that.
    There was some talk, I believe, between both of the 
agencies about getting GSA involved to help with that. Could 
you give me an update on where we are on that?
    Mr. SHULMAN. Sure. As you know, we have had a chance to 
visit--we have had an unprecedented number of phone calls. Just 
to give Members of the Committee a sense, in 2007 we had 19 
million phone calls in the month of May come into the IRS. It 
was kind of clean-up for the tax season. In May of this year we 
had 72 million phone calls come into the IRS. So the numbers 
are staggering.
    I reached out a couple of weeks ago to Commissioner Astrue, 
he said, ``Okay, I'm thinking about who else had large phone 
operations,'' and said, ``Does Social Security have capacity?'' 
So that is, I think, what started this conversation to give us 
some assistance, because the phone calls keep coming in a 
little longer than we had thought.
    We are in the process, just like that phone call, of 
exploring a variety of options. There are actually some 
limitations in going outside of our building to answer phone 
calls. As you heard earlier, and you've seen in my written 
testimony, we have diverted some personnel to answer phones 
from other duties. We have also kept overtime workers on to 
answer phone calls.
    One of the major problems is people outside of the IRS can 
answer simple questions like, ``How do I fill out the form, 
where do I send it?'' Anyone who has a specific issue, which a 
lot of the taxpayers who call do, have to actually get into 
their tax records, 6103 implications.
    So, we are exploring all options, and looking outside the 
Agency, but we're also going to keep our head down, and make 
sure we do everything we can inside of the IRS.
    Ms. MCMAHON. Mr. Chairman, I want to thank you very much 
for your earlier comments today, recognizing the constraints 
that SSA is under, and the problems that we're dealing with, 
just handling our core work.
    We want to be as helpful as we can, and we are in a 
position, because of the funding that we were given by 
Congress, to actually provide some funding to IRS to help with 
either a contract with USA Services, or to assist with the next 
mailing they do, those kinds of things, and we're going to do 
    Our problem is we don't have actual capacity. We are 
working maximum overtime now. Anything we do on this is 
something that we're not doing on our core work. It's not a 
question of if we have people who can come in on overtime and 
do some other work. It's a question of if they come in on 
overtime, instead of doing our work, they will do the other 
work. We would prefer not to go there, if we can avoid it.
    Mr. MCNULTY. Thank you very much. Mr. Ramstad may inquire.
    Mr. RAMSTAD. Thank you, Mr. Chairman. Thank you, 
Commissioner and Deputy Commissioner, for your testimony, and 
also for your important work on behalf of taxpayers and Social 
Security recipients.
    Mr. Shulman, you really had to hit the ground running when 
you became the commissioner in March. I know you arrived in the 
middle of a hectic filing season, and had to, at the same time, 
oversee the massive economic stimulus project we are discussing 
today. I want to congratulate you for doing a tough job very 
    I would also like to ask you two questions on two different 
    First, with respect to our brave--the spouses of our brave 
soldiers, sailors, airmen and Marines, I know in order for 
married couples to qualify for the full rebate, that both 
spouses must have valid Social Security numbers. Just this 
week, as I'm sure you know, the President signed the Heroes 
Earnings Assistance and Relief Tax Act, which waives this rule 
for spouses in military families.
    How will the IRS determine which returns are affected by 
the new rule?
    My second question, is the IRS working with the Department 
of Defense to do a military outreach, to do outreach to 
military families on the new law?
    Mr. SHULMAN. Yes, we obviously agreed with the law, and 
have been tracking it.
    But, initially, we actually talked to this Committee and 
others, and told them that we wouldn't be able to true this up 
until next filing season, a year from now. As it passed, and as 
we've tried to do with all things stimulus-related, we've said, 
``Let's get creative, let's push very hard.''
    I am pleased to report that the current plan is some time 
around mid-October, when all the returns get in, we will run a 
match and aim to distribute checks no later than November to 
these families who weren't eligible under the first run. We 
will do another run once we have a full complement. So, we 
can't identify them, and we plan to get them out later this 
    We have done a lot of outreach to many communities, and we 
will definitely reach out to the Defense Department, and make 
sure people understand, really, that they don't need to do 
anything, as long as they have already put their--Social 
Security number on there of a spouse or someone who doesn't, 
that we will get this out to them.
    Mr. RAMSTAD. Well, thank you, Commissioner, for that 
response, because you can obviously--or you obviously do see 
the significance of this. I mean, of all taxpayers, we--there 
are so many military families who are hurting right now, 
financially and otherwise. I think this is--I am glad to see 
the Service giving this such a top priority, and I appreciate 
your leadership and your creative creativity, in terms of 
getting this done.
    The other questions I had concern the refund anticipation 
loans and taxpayer refunds. Earlier today--I know you were 
here, and you heard Mr. Pomeroy say that a number of taxpayers 
signed up for refund anticipation loans when they went to paid 
preparers. Some preparers did not indicate the bank accounts 
listed on the returns--did not indicate that the bank accounts 
listed were temporary refund anticipation loan accounts, and 
not a permanent account of the taxpayer.
    I know I have had a couple of constituents broach this 
problem with me. In the cases in which the IRS sent a payment 
to a temporary account, how did the IRS or the bank work to 
correct the problem? Is that--are you on top of that? Were the 
payments returned to the IRS? Were banks able to forward the 
payments to the rightful recipients? I would like you to 
address both those questions, please.
    Mr. SHULMAN. Sure. Well, the way this works is when you get 
a refund anticipation loan in the normal filing season--any 
taxpayer--the service provider who gave the loan, files the 
return. They actually disperse money ahead of time to the 
taxpayer, and they receive the refund. When they file with the 
IRS, they're required to put a RAL indicator on the account, so 
it will indicate that they have an account.
    So, what we did was we didn't actually send them to those 
accounts. What happened was anyone who had a RAL indicator, we 
knew that wasn't their account, and that was the account of the 
service provider. So, we were sending it to the taxpayer. So, 
those people never got a direct deposit. It was rerouted, and 
they were sent a check.
    There was one vendor that we found who actually hadn't put 
a RAL indicator on accounts. We talked to them very early. We 
put RAL indicators in and sent checks.
    So, the real issue and confusion that I think some 
constituents have had is around that they got a refund 
anticipation loan direct deposited to an account of theirs, or 
a RAC. They assumed they were in the direct deposit stream for 
stimulus, and they weren't, because again, we didn't know that 
they had accounts.
    So, there was a lot less--we haven't heard of, or at least 
I'm not aware of ones that accidentally went to an account we 
had to get back because of a refund anticipation loan. The 
bigger issue has been there is a lot of people who thought they 
were going to get the direct deposit, which came quicker in 
May, and they're actually getting checks now, and through the 
week of July 11th.
    Mr. RAMSTAD. Well, thank you very much, Commissioner. I 
yield back.
    Mr. MCNULTY. Mr. Pascrell may inquire.
    Mr. PASCRELL. Thank you, Mr. Chairman. Commissioner 
Shulman, thank you for doing a great job in a very short period 
of time. You have, I believe, the tiger by the tail. But there 
is a tremendous amount of work ahead of you. I want to get into 
that work.
    I want to thank you, Commissioner McMahon, for all your 
service to your country through the position with the Social 
Security Administration.
    My first question is this, Commissioner Shulman. We have 
payments going to 76 million Americans, payments of a total of 
$63.8 billion. That is 70 percent of what we are trying to 
target. Is that correct or incorrect?
    Mr. SHULMAN. We--I think, if you're asking about--let me 
presume what you're asking, and you can tell me if I'm right. I 
think you're asking about the targeted population that we're 
doing extra outreach to?
    Mr. PASCRELL. How far do we have to go----
    Mr. SHULMAN. Yes. It's--so the $63 billion that has gone 
out is part of the total $100 billion economic stimulus 
payments. So, those are numbers for the entire population----
    Mr. PASCRELL. Right.
    Mr. SHULMAN [continuing]. Regular filers, and people who 
normally wouldn't need to file. And----
    Mr. PASCRELL. So, what percentage do we have to go after, 
approximately, and how much more money needs to be sent in 
checks to those individuals?
    Mr. SHULMAN. Well, we're on target for the original 
    Mr. PASCRELL. Right.
    Mr. SHULMAN. So, by the week of July 11th, when the first 
wave of checks would go out to anyone who filed on time, we 
will have $95 billion distributed to about 110 million 
    Mr. PASCRELL. That's how we come up with the five million 
that we're having----
    Mr. SHULMAN. No, that's totally different numbers.
    Mr. PASCRELL. Totally different?
    Mr. SHULMAN. Yes.
    Mr. PASCRELL. How do we get to that number?
    Mr. SHULMAN. That number, the 5 million, we estimated with 
Social Security and Veterans' Affairs Department, that--we 
thought--there was a special population of about 20 million 
people who were eligible for stimulus, but normally wouldn't 
file. Those----
    Mr. PASCRELL. So, in other words----
    Mr. SHULMAN [continuing]. We have hit about 74 percent.
    Mr. PASCRELL. Is it safe to say that the majority of those 
people that still have to get their stimulus check are veterans 
or non-Social Security recipients?
    Mr. SHULMAN. I don't think it is.
    Mr. PASCRELL. You don't think it is?
    Mr. SHULMAN. Yes. I think--we--separate population. There 
are a lot of Social Security recipients and veterans----
    Mr. PASCRELL. Right.
    Mr. SHULMAN [continuing]. Who have gotten the check. There 
are also folks who needed to file regularly. So, we are really 
breaking it down into everyone who is going to file anyway, and 
get a stimulus payment----
    Mr. PASCRELL. So, between the last numbers that you 
provided, $63 billion, and $120 billion, which should be out by 
July 11th, that's a lot of checks to have to go out.
    Mr. SHULMAN. The total number by the end of the year will 
be about 100 billion.
    Mr. PASCRELL. 100 billion.
    Mr. SHULMAN. Yes, Sir, yes.
    Mr. PASCRELL. Not 120; 100.
    Mr. SHULMAN. Yes.
    Mr. PASCRELL. Okay.
    Mr. SHULMAN. There is real--we basically identified 
everyone, or they self-identified by filing a tax return, 
except for that five million who, as we've talked about, we're 
going to make an extra effort to go find.
    Mr. PASCRELL. Just a quick question, and then I want to get 
into my second series. What is the status of the paper 
    Mr. SHULMAN. Yes. One of the consequences of having so much 
overload on our phone, there are temporary employees we bring 
on every filing season. They answer phones and they workpaper 
inventory. They usually would roll off of the phones near the 
end of May, and start working down a paper inventory.
    Right now, we have a lot of extra paper inventory. The 
numbers, we've got about two million pieces of paper inventory 
to work through.
    Mr. PASCRELL. Right.
    Mr. SHULMAN. Usually, we would have about 1.3 million at 
this time of year, so it's not an absolute number.
    Mr. PASCRELL. It's 700,000, 800,000 more.
    Mr. SHULMAN. Yes, it's significantly more. That's one of 
the issues we're going to need to work through this year.
    Mr. PASCRELL. Do you have the resources to respond to that?
    Mr. SHULMAN. If we can keep our temporary employees later, 
    Mr. PASCRELL. What does that mean, though? You have money 
that's allocated. Do you have enough money that's allocated, so 
you can keep them?
    Mr. SHULMAN. We are in the process of actually talking with 
different Committees in Congress. The money has been 
appropriated, we just need some authority to move it between 
different accounts. If we do, we will be able to staff up and 
work down that inventory.
    Mr. PASCRELL. There are many complaints that I get in my 
office up in Patterson, New Jersey, in the same building that 
conveniently, or inconveniently, is the IRS and Social 
    Several of my constituents have complained that they are 
not able to get assistance from IRS. You talk about this phone 
overload. There is a toll number that you can, you know, dial 
up. They can't get the--the same thing happens on the rebate 
    Can you address that? Is that a common problem throughout 
the country?
    Mr. SHULMAN. Yes, it is--we have an 800 number. I gave you 
a few stats, you know, 72 million calls in May versus 19 
million last year.
    Mr. PASCRELL. Right.
    Mr. SHULMAN. Another interesting statistic, in 2001, when 
there was another stimulus program, we got 42 million calls 
during the 15 months of that program. Again----
    Mr. PASCRELL. You're up about 52 million calls from what 
you usually have.
    Mr. SHULMAN. What's that?
    Mr. PASCRELL. You're up about----
    Mr. SHULMAN. Yes. So----
    Mr. PASCRELL. How do you handle it?
    Mr. SHULMAN. So, here is what's happening on the phones. 
You call the IRS phones, we have been very clear on the message 
that you don't need to talk to us if you filed a tax return. So 
we encourage you to, if you filed a tax return, be patient, you 
will get your stimulus payment on time. We encourage people to 
go to our website.
    We also tell people there is heavy call volumes now, so 
they're going to have to wait longer than normal. Normally, 
people wait a few minutes, our target is under 6 minutes now. 
In the month of May it was up to about 13 minutes, average.
    So, people can get through. They might have to call a 
couple of times. Some people get to automated service, some 
people hang up when they hear there's a wait time. Again, this 
is where we'd like not to be, but it's a fact of doing stimulus 
in the middle of filing season.
    Mr. PASCRELL. But, Commissioner, the people that you want 
to go to your website are the very people who can't get to your 
website. The very people that are the majority of individuals 
who--and I don't care what the program is, what we're talking 
about, whether it's EITC or AMT, or whether, in this case, the 
stimulus checks. You know, we've got to find another way to get 
to them, because they have no way of getting on to the website. 
They may be in homes, they may be----
    Mr. SHULMAN. Yes.
    Mr. PASCRELL. You know, I just have one other quick 
question, if I may?
    Mr. MCNULTY. Yes.
    Mr. PASCRELL. You said in your testimony that one of the 
major problems was differentiating between the refunds and 
stimulus payments, because they came at the same time, correct? 
Tax refunds, right?
    Mr. SHULMAN. In the same----
    Mr. PASCRELL. On page three you address that. The economic 
stimulus payments, you wrote, overlap with the normal tax 
refund season.
    Just very briefly, tell us what that convoluted system--you 
know, how did it result? What was the outcome?
    Mr. SHULMAN. Oh. It's as I said in my oral testimony, when 
Congress passed the bill----
    Mr. PASCRELL. Bad timing.
    Mr. SHULMAN [continuing]. For stimulus, and the President 
signed it, the goal was to get the money out as quick as 
    Mr. PASCRELL. Right.
    Mr. SHULMAN. The reason we started in May is because we 
didn't want to endanger tax filing season in April. The numbers 
are pretty compelling. This year we sent out $241 billion in 
refunds. So we were trying to stimulate the economy, we thought 
it was quite important to get the refunds out, as well.
    So, this was just a fact. We basically moved the stimulus 
payments to a place which was as quick as possible, yet being 
prudent, acknowledging the----
    Mr. PASCRELL. So, the----
    Mr. SHULMAN [continuing]. The filing season.
    Mr. PASCRELL [continuing]. The refund total was a greater 
stimulus package than the stimulus package?
    Mr. SHULMAN. The refunds were $241 billion.
    Mr. PASCRELL. Thank you, Mr. Chairman. Thank you, 
    Mr. MCNULTY. Mr. Brady may inquire.
    Mr. BRADY. Thank you, Mr. Chairman. I don't raise the fuel 
price issue to make anyone in this chamber uncomfortable, it's 
just that the price of fuel is making so many of our families 
uncomfortable, especially seniors, who are on fixed income. 
When you take--when they have to deal with paying $536 more 
this year than last year on gas, plus increased Medicare 
premiums and they're on a fixed income, they've got a problem.
    I visited with a senior the other day at a gas station in 
Bridge City, Texas, who was upset because she could no longer 
attend church on Wednesday night because she needs the gas to 
take her husband to all of his doctor visits during the week. 
So, seniors on a fixed income are really getting hurt by these 
fuel prices. A number of them are eligible for stimulus checks.
    I really appreciate the job both of you are doing in reach 
out to them. We have a long way to go.
    But in Texas, we have a number of retirees who are not 
covered by Social Security. They are in a Social Security 
substitute like the Texas Teacher Retirement system. They have 
asked us a question about whether their pension benefits would 
make them eligible for the stimulus payments.
    As you may recall, Social Security benefits, certain 
railroad retirement benefits, and certain payments to service 
men were specified as counting toward income levels needed to 
make someone eligible for the stimulus payment, but there was 
no mention of pension income counting, such as from non-covered 
    Others have said since these pensions are taxable, 
recipients would qualify for a payment, because they have a net 
income tax liability which is greater than zero.
    Commissioner Shulman, would you set the record straight for 
me on this issue? What is the right answer for them?
    Mr. SHULMAN. The right answer--and I would go back to our 
technical folks as well--but is if they have tax liability for 
any income, then that makes them eligible.
    In general, pension payments are not, unless they are 
taxable pension payments. So--but all of this is us just 
executing the law as it was written.
    Mr. BRADY. So, as I understand it, seniors would be 
eligible, in this case, if they had $3,000 of earned income, or 
at least $1 in income tax liability. That would trigger them, 
    Mr. SHULMAN. I believe the answer is yes, but let me get 
just the details of your question and come back to you 
afterward, so I don't get the record wrong.
    Mr. BRADY. Here is my worry. Retired teachers, especially 
those who retired from many years ago who had low salaries, and 
therefore very low retirement benefits, if they don't get 
enough in Texas Teacher Retirement to trigger tax liability, my 
understanding is they would be left out of a stimulus check.
    Mr. SHULMAN. Well, my understanding is, in reading the law 
and administering it, that the law was written very 
specifically, that you had to have $3,000 in taxable income, 
unless you were part of an exempted category.
    So, you know, if the law was written that way, that's 
probably correct.
    Mr. BRADY. So, the Social Security benefits don't qualify 
them, because they don't get them. If they don't reach the tax 
liability trigger, they don't move in--they aren't eligible 
under that category. I am----
    Mr. SHULMAN. Well, I think Social Security was exempted 
under the law, and that was the design.
    Mr. BRADY. Right.
    Mr. SHULMAN. So, Social Security counts, pension benefits 
    Mr. BRADY. Right, but if they don't receive Social Security 
because they're in a substitute, and those substitute payments 
aren't enough to trigger even a dollar of liability, they 
wouldn't receive a stimulus check?
    Mr. SHULMAN. I believe that is correct, under the law.
    Mr. BRADY. Okay. That is a worry, because we do have a 
number of teachers in that situation in Texas. Again, you know, 
while those with modern-day retirements, I think, would trigger 
into it, because the liability--those who, again, thankfully 
taught back when wages for teachers were just intolerably low, 
their benefits, I'm afraid, won't move them in the trigger yet.
    I think they are probably some of the group that we most 
need to reach with these stimulus payments. Chairman, thank you 
very much.
    Mr. MCNULTY. Thank you, Mr. Brady. On behalf of Chairman 
Lewis and Ranking Members Ramstad and Johnson, I want to thank 
both commissioners for being here today for your good work, and 
for your testimony.
    I want to compliment you again on the job that has benne 
done so far, but reiterate the fact that five million people 
are still out there and eligible, and we need to get to them. 
So, I commend you for the outreach efforts which you are 
    Jim and I just signed letters that are going to be signed 
by Sam Johnson and John Lewis to every single Member of the 
House of Representatives to reinforce that message all across 
the country. So, I hope we can help in that regard.
    Also, I would like, obviously, both agencies to keep in 
close contact with us, to let us know any other ways in which 
we can be helpful.
    With that, this hearing is adjourned.
    [Whereupon, at 12:51 p.m., the Subcommittees were 
    [Submissions for the Record]

                            AARP, Statement










                Morrison Affairs Public Group, Statement



                  National Council on Aging, Statement
    The National Council on Aging (NCOA) thanks the Chairman Lewis, 
Chairman McNulty, and Committee Members for the opportunity to submit 
testimony about our work to assure that all eligible seniors get an 
Economic Stimulus Payment and to make recommendations to you based upon 
our experience with the stimulus payments to date.
    NCOA is the oldest nonprofit organization dedicated to improving 
the lives of older adults, with a special focus on ensuring that low-
income seniors are able to access the benefits that will improve their 
lives. When the economic stimulus payments were being discussed by 
Congress, NCOA immediately recognized the importance of also including 
the many millions of Social Security beneficiaries and veterans who 
receive disability benefits, but who no longer file tax returns in the 
economic stimulus package. NCOA and other organizations encouraged 
Congress to include these populations in the final economic stimulus 
    Upon passage of the economic stimulus package we went to work on a 
special outreach campaign to reach out to seniors who do not normally 
file tax returns. We developed and posted economic stimulus payment 
resources for seniors and the aging network to the National Council on 
Aging Web site www.ncoa.org For our partners in the aging network we 
developed a new page on the My Medicare Community, our online community 
at www.MyMedicareCommunity.org, as a central repository of information 
about the program for benefits counselors who work with seniors. There 
have been over 2,000 views of this page. We have also worked directly 
with the IRS and many new and old partners to assure that all seniors 
receive their stimulus payment.
    As Social Security and IRS matched data to identify 20.5 million 
seniors and veterans who do not usually have to file tax returns, it 
became apparent that lack of familiarity with even the simplest tax 
return could prevent many from filing for their stimulus payment. NCOA 
worked quickly with AARP Tax-Aide to develop a user-friendly online 
tool to assist in the completion of IRS 1040A forms.
    The Web based tool does not look like a tax form; it asks seven 
simple questions and then pre-populates the required 1040A tax return. 
Moreover, the tool offers simple, easy-to-understand directions to 
assist individuals in completing and printing the IRS 1040A form. The 
tool provides personalized instructions on where to mail the completed 
form and prints a second completed 1040A for individuals to retain for 
their records. The tool makes it easy for stimulus payment filers, 
family members, caregivers, and benefits counselors to take the 
necessary steps to file for the stimulus payment.
    Since its launch in March 2008, more than 25,000 people have used 
the Stimulus Payment Tool, and traffic to the tool continues to grow. 
This tool can be accessed either at NCOA's www.BenefitsCheckUp.org or 
through AARP's Web site at www.aarp.org/stimulus help
    NCOA commends the IRS and SSA for their efforts thus far and 
congratulates them on reaching over 70 percent of this special 
population, but continued efforts are now urgently required to engage 
the individuals who have not yet filed a 1040A. Based on our prior 
experience reaching out to low-income seniors, and our intensive work 
to get stimulus payments into the hands of this population, we make the 
following recommendations:
National Council on Aging Recommendations
    1.  We are impressed with the extensive database IRS has shared 
with the Congress and with national partners that shows where the 
remaining 5.2 million seniors and veterans live. We believe the data 
can be used to drive an energetic outreach campaign to reach this 
cohort that has not yet filed. In order to assure the widest and most 
effective use of the data to target outreach, education and tax filing, 
we have committed to post the database to our Web site so that 
community-based organizations within the Aging Network can have easy 
access in order to plan outreach and filing campaigns. Further 
refinements to this and other similar databases of seniors with limited 
income and resources have the potential to provide critical information 
in promoting efforts to find and enroll this hard-to-reach population 
in benefits they are eligible for, but still not receiving.
    2.  We fully and enthusiastically support the IRS in its decision 
to send a second letter to reach out to the 5.2 million seniors and 
veterans who have not yet filed for their stimulus payment.

    NCOA is disappointed, however, that the IRS has determined not to 
include pre-populated 1040A tax returns with each letter. IRS has a 
significant amount of data from which to pre-populate tax returns for 
this population. Due to the data exchange between IRS and the Social 
Security Administration, we believe IRS has sufficient information to 
pre-populate tax returns for this hard-to-reach population with minimal 
risk to IRS error rates. Pre-populated forms would alleviate the 
anxiety and fear of complexity that many people who have not had to 
deal with the IRS in many years feel about filing tax forms. 
Additionally, removing many data entry elements would encourage more 
individuals to apply for the stimulus payment to which they are 
entitled. The population that subsists solely on disability and/or 
Social Security payments could truly benefit from the stimulus 
payments. Pre-populating forms would ensure that more people receive 
their payments.
    Next, NCOA very much appreciated the opportunity we were given to 
comment on the draft of the second IRS mailing. We recommended to the 
IRS concise text and a call to action designed to motivate the specific 
hard-to-reach cohort of 5.2 million seniors and disabled veterans. We 
urged clear, plain language in order to encourage individuals to take 
the action needed, with language and format to accommodate possibly low 
literacy levels of many within the remaining 5.2 million.
    We would also suggest customizing a message and design for the 
envelope in order to motivate those who receive it to open and read the 
important message contained within it.

    3.  We encourage the IRS to continue its very productive 
partnership with national organizations, like NCOA, that have 
experience reaching out to low income older adults. NCOA successfully 
reached the much of the elderly population during the introduction of 
the Medicare Part D benefit and provided personalized assistance to 
many seniors to enroll in the low income subsidies (Extra Help). 
Collaborating with local partners and organizations across the country 
has proven to be effective in the past and NCOA proposes that the IRS 
work closely with local organizations that the remaining 5.2 million 
individuals already know and trust. These organizations can readily use 
the Economic Stimulus Tool to file tax returns for their clients, so 
they can get the stimulus payments that are so important especially in 
light of rising food and fuel prices.
    4.  We encourage congressional offices to use the Economic Stimulus 
tool developed by AARP Tax Aide and National Council on Aging and found 
at www.BenefitscheckUp.org and www.aarp.org/stimulus help to promote 
its use and to enable constituents who are unfamiliar with IRS forms to 
easily file for their stimulus payments.
    5.  We urge the Committee to do all it can to ensure that the 
Social Security Administration and the Veterans Administration make a 
more robust effort to reach out to those among their constituents who 
have yet to file in order to get their stimulus payments.

    Thank you for the opportunity to provide our input. We look forward 
to working with the Congress and the Executive Branch agencies to 
ensure that all eligible individuals file for the economic stimulus 
    For more information, please contact Howard Bedlin, Vice-President 
of Public Policy & Advocacy at [email protected]


                        Paul Donnelly, Statement
    ReformtheRebate.com is a coalition organized to change the tax 
rebate rules that discriminate against legal immigrants. We believe 
that Congress over-reached when U.S. citizens and legal immigrants 
whose spouses or children are not ``illegal'' but who do not have 
Social Security Numbers due to SSA policies were barred from the 
stimulus rebate if they file jointly, as married taxpayers are 
authorized to do. We urge the Congress to extend to such civilian 
families the same consideration that was recently applied to military 
families, and for the same reasons: those who obey immigration law 
should not be penalized in the name of fighting illegal immigration.
    If this cannot be accomplished, the legal spouse should be able to 
receive the rebate without losing the benefit of joint filing this year 
and in the future as the price of getting a rebate.
    We suggest the following questions:

    1)  The IRS has never been put into the position of enforcing 
immigration law. To avoid requiring the IRS to determine that a spouse 
is here legally without a Social Security Number, Congress has directed 
that when someone in the military files a joint return with a valid 
SSN, the couple is eligible for the stimulus rebate.
        Isn't that the fair way to treat civilian couples, as well?
    2)  If the Congress directed the IRS to determine the immigration 
status of a spouse who does not have a SSN when there is a joint return 
where the other spouse has a valid SSN, would that impose a substantial 
administrative burden on the IRS?
    3)  Whether or not someone is working here legally, the law 
requires that they pay taxes on their income. Because many, if not most 
illegal workers have taxes withheld by their employers, the IRS 
acknowledges that illegal workers who file returns receive refunds 
based on their withholding just like anyone else.
        Does the IRS have an estimate for the total amount of taxes 
that are refunded on returns with no SSN or an invalid SSNs each year?
    4)  Does the IRS accept tax returns without a SSN or ITIN? If so, 
are refunds paid if due on such returns? What if more than one return 
uses a single SSN? How are payments and refunds processed? Isn't it 
true that sometimes taxpayers receive deficiency notices due to other 
individuals' earning wages on their account which are reported on W-2s?
    5)  Does the IRS verify the validity of an SSN before processing a 
return? Does the IRS identify duplicate filings on a single SSN? How 
does the IRS sort out the situations of multiple W-2s on a single SSN 
when some may reflect multiple jobs and others may reflect identity 
    6)  There are many thousands of cases, beyond the military, where a 
U.S. citizen or legal permanent resident is married and files jointly 
with a spouse without an SSN. Does the IRS have an estimate for the 
total amount of the stimulus rebates these families would be eligible 
for if the Congress applied the same fair standard as to the military?
    7)  The IRS has a difficult job to do in the best of times. Were 
Congress to clarify the intent of the stimulus package to be fair to 
the U.S. citizens and legal permanent residents married to those who 
lawfully file joint returns with only one SSN, would a credit on next 
year's taxes equal to the amount of the stimulus rebate be the most 
efficient use of IRS resources in correcting this unfair and unintended 
slap at legal immigrants?


                 Santa Barbara Bank & Trust, Statement
Dear Mr. Chairmen and Ranking Members:

    We are submitting this statement for the written record of the 
joint hearing held by the Oversight and Social Security Subcommittees 
on Thursday, June 19, 2008, to examine the status of the economic 
stimulus payments (ESP) provided for in the ``Economic Stimulus Act of 
2008'' signed into law by the President on February 13, 2008 (P.L. 110-
    Santa Barbara Bank & Trust (SBB&T), a brand of Pacific Capital 
Bank, N.A., is one of the nation's largest providers of tax-refund 
related bank products--refund anticipation loans (RALs) and non-loan 
refund anticipation checks (RACs). We are particularly concerned about 
comments made during the hearing which inferred that the RAL industry 
was somehow responsible for the fact that ESPs were delayed up to eight 
and a half weeks for taxpayers who elected this year to use RALs or 
RACs in order to more quickly receive funds in anticipation of their 
tax refunds.
    In her written testimony, Nina Olson, the National Taxpayer 
Advocate, highlighted as a major concern the fact that more than 20 
million taxpayers who obtained RALs and RACs during the 2008 filing 
season were ineligible to receive their stimulus payments quickly via 
direct deposit and had to wait up to eight and a half weeks longer to 
receive their checks by mail. Ms. Olson noted that the delays were not 
caused by IRS error, but failed to provide any other contextual 
background as to why the IRS decided to mail checks to these particular 
taxpayers, rather than provide ESP quickly by direct deposit.
    On February 15, 2008, the IRS issued a press release (IRS Press 
Release 2008-21) announcing that ESPs would be made by paper check to 
any taxpayer who received RALs or RACs in this year's filing season. 
There were very good reasons for the IRS's decision to deliver ESPs to 
these taxpayers by paper check. Taxpayers who utilize RALs to more 
quickly obtain funds in anticipation of their tax refunds generally 
receive payment (minus fees for tax preparation, filing, financing or 
processing) within 24 hours after application. In the case of RACs, 
taxpayers receive the net proceeds of their refunds (minus tax 
preparation and account set-up fees) when the refunds are received from 
the IRS (on average, 11 days after filing). The lending institution 
that provides the RAL or RAC opens temporary bank accounts for its 
customers into which the tax refunds are deposited. These temporary 
accounts are closed after delivery of a RAC to the taxpayer or 
satisfaction of the taxpayer's RAL.
    More important, a large percentage of taxpayers who utilize RALs or 
RACs to more quickly obtain funds in anticipation of their tax refunds 
do not maintain regular bank accounts at a financial institution. As 
the National Taxpayer Advocate's 2007 Objectives Report to the Congress 
    ``It is estimated that approximately ten percent of American 
households do not have an account at a financial institution. These 
unbanked taxpayers have fewer refund delivery choices. They can request 
that the IRS mail a paper refund check on either an e-filed or paper 
return. However, these options generally entail high check cashing fees 
and take up to six weeks to actually deliver the refund. For taxpayers 
unwilling to wait four to six weeks for a check, the only real option 
is to buy a bank product, which typically involves high fees.'' \1\
    \1\ National Taxpayer Advocate, 2007 Objectives Report to Congress, 
Volume II, p. 14 (July 2006).
    More recent data indicates as many as 28 million Americans are 
``unbanked.'' \2\ ``Forty-six percent (46%) of African Americans and 
thirty-four percent (34%) of Hispanic Americans do not have an account 
at a federally-insured financial institution.'' \3\ Those without 
mainstream banking relationships cannot take advantage of IRS direct 
deposit of their refunds. RALs and RTs bridge the potential eight-week 
gap that many taxpayers who need quick access to funds would otherwise 
have to wait to receive a paper check from the IRS. Thus, a very large 
percentage of the taxpayers affected by the IRS's February 15th 
guidance would have received their ESPs by paper check regardless of 
whether they elected to obtain a RAL or RAC.
    \2\ Remarks of FDIC Vice Chairman on June 21, 2007, to FDIC's 
Alliance for Economic Inclusion.
    \3\ Id.
    Ms. Olson's testimony also failed to note that all taxpayers who 
elected direct deposits of their income tax refunds into multiple bank 
accounts (by filing IRS Form 8888), or who failed to elect direct 
deposit of their refunds (approximately 30% of all filers \4\ were 
required to receive ESPs by paper check, not simply those taxpayers who 
chose to obtain RALs and RACs.
    \4\ See http://www.irs.gov.pub/irs-soi/07ifss13.xls.
    Several Subcommittee Members were understandably concerned by Ms. 
Olson's testimony pointing out the delays in delivering ESPs to 
taxpayers who obtained RALs and RACs in this filing season. Rep. Earl 
Pomeroy (D-ND) asserted that the RAL industry should have done more to 
notify taxpayers before they elected RALs or RACs that doing so would 
delay their ESPs. The fact is that responsible tax return preparers did 
notify RAL and RAC customers as soon as they received notice of the IRS 
guidance of the potential delays in receiving their ESPs. However, the 
vast majority of taxpayers who utilize RALs and RACs generally do so 
very early in the tax filing season. In SBB&T's case, 75 percent of our 
RAL/RAC customers in the 2008 filing season had already made their 
decision to obtain RALs/RACs before the IRS's press release was issued 
on February 15th.
    In order to prevent additional ESP delivery delays, RAL lenders 
proactively worked with the IRS before the first ESPs were scheduled to 
be direct deposited to prevent ESPs from being deposited to the 
temporary accounts established to facilitate RALs and RACs. In fact, 
SBB&T alerted the IRS to an error in a large tax practitioner's 
software that would have caused over 500,000 ESPs to be erroneously 
deposited had the error not been corrected. The bank also provided the 
IRS with the solution to fix the error. According to IRS policy, in the 
handful of cases where the IRS inadvertently deposited ESPs into a 
temporary account, SBB&T immediately sent a check to the affected 
taxpayer without charge.
    It is somewhat ironic that critics of the RAL industry are 
concerned about the impact on taxpayers of the delays in delivering 
ESPs, yet seem to dismiss the very real value that RALs provide to 
taxpayers by giving them quick access to much needed funds early in the 
tax filing season. Particularly for many low-income taxpayers eligible 
for the earned income tax credit, their annual tax refund represents 
the largest sum of money they will receive at one time in the entire 
year, and it comes at a critical time of the year after many families 
become overextended during the holiday season.
    In her 2007 Annual Report to Congress, the National Taxpayer 
Advocate stressed the negative impact to low-income taxpayers of delays 
in receiving their tax refunds:
    Tax refunds are particularly important to low-income taxpayers--A 
taxpayer for whom the refund is so significant often makes financial 
plans based on when he or she anticipates receiving the refund and may 
view the refund as a lifeline. For some taxpayers, a delay of two to 
four weeks in receiving the refund could mean eviction, inability to 
pay the high heating bills that arise during winter, or defaulting on 
credit card bills from the holiday season.\5\
    \5\ National Taxpayer Advocate's 2007 Annual Report to Congress, 
December 31, 2007, Volume I, p. 5.
    The Taxpayer Advocate was specifically addressing the delays in 
this year's filing season resulting from the fact that Congress did not 
pass legislation to address the so-called alternative minimum tax 
``patch'' until December 2007. However, the same considerations apply 
to RALs as well. If the ability to receive the proceeds of one's tax 
refund two to eight weeks earlier than the IRS can deliver it means the 
difference between paying for housing or being evicted, paying for heat 
or enduring the cold, or paying off credit card debt or defaulting, 
paying a reasonable fee to obtain a RAL is a sensible decision.
    It is important to recognize that fees charged by SBB&T are indeed 
reasonable. Critics often use Annual Percentage Rate (APR) measurements 
of RAL costs to justify the argument that RALs are high cost loans that 
take advantage of taxpayers. However, the use of APR calculations to 
measure the cost of RALs is very misleading. Due to the short-term 
nature of a RAL, APR calculations create an inflated representation of 
their true cost. In its 2006 Report to Congress on the Debt Indicator, 
the IRS contended that the APR is an inappropriate measure of the cost 
of a RAL:
    ``Unlike loans of one year or longer, APR calculations for loans 
not based on simple interest rates add multiples of costs that 
borrowers will never pay. [When calculating APRs for RALs], finance 
charges are assumed to be paid 36.5 times over the course of the year, 
when in fact they are paid only once, no matter how long it takes to 
pay back the loan--The reason this is important information is because 
some critics of RALs cite the APR as the real interest rate that 
taxpayers are charged.'' \6\
    \6\ IRS Report to Congress on the Debt Indicator, June 2006
    The average RAL funded by SBB&T during this filing season was 
$3,200, for which the bank charged an account set-up fee of $31 and a 
finance charge of 2.5% of the loan amount, or $80. This equates to a 
total cost of about 3.5% of the total loan amount. These fees remains 
fixed regardless of how long a RAL is outstanding. SBB&T does not 
impose late charges or additional interest charges, even if a RAL is 
never repaid. Nevertheless, we are required by federal banking laws to 
calculate an APR on a RAL loan using an 11-day repayment period. Under 
the example cited above, this transforms our fees of 3.5% of the loan 
amount to an APR of 115%, even though the total cost to the taxpayer 
remains at $111.
    RALs (when not viewed in the context of an APR) cost less than 
other common financial transactions that are entered into on a daily 
basis. For example, Western Union charges consumers $145 to send $3,000 
within the United States via wire transfer.\7\ Unlike RALs, a wire 
transfer is a completely risk-free transaction. Fees for credit card 
advances can range from three to four percent of the advanced amount, 
plus interest charges--or $96 to $128, plus interest, on a $3,200 
advance. Payday loans, without taking into account the even greater 
interests costs when rolled over, range from $15-$20 per $100 borrowed. 
By comparison, the average SBB&T RAL costs consumers $3.50 per $100 
borrowed. When viewed in proper context of the relatively few choices 
that many RAL borrowers actually have to obtain credit, the cost of a 
RAL is comparatively inexpensive.
    \7\ See www.WesternUnion.com for Western Union's charge for its 
``Money in Minutes'' wire transfer program to send $2,999 (their 
maximum) anywhere in the United States.
    We appreciate having this opportunity to provide Members of the 
Subcommittees with this additional background information explaining 
the reasons for the delays in delivering ESPs to taxpayers who obtained 
RALs and RACs, and request that you include our statement in the 
written record for the hearing.
                                                           Joe Sica
                        SVP--National Government Relations Director
                                         Santa Barbara Bank & Trust
                                                   70 Oberlin Drive
                                        San Diego, California 92121


               The Honorable J. Russell George, Statement
    Chairman Lewis, Chairman McNulty, Ranking Member Ramstad, Ranking 
Member Johnson, and Members of the Subcommittees, thank you for the 
opportunity to submit testimony for this hearing. My comments will 
focus on the Treasury Inspector General for Tax Administration's 
(TIGTA) audit and investigative actions pertaining to the Economic 
Stimulus Act of 2008.
    The Economic Stimulus Act of 2008, signed on February 13, 2008, was 
enacted to energize the national economy. For most individuals, the 
amount of the stimulus payment received is dependant on their net 
income tax liability. Single taxpayers will generally receive the 
greater of $300 or their actual tax liability up to $600 and couples 
will generally receive the greater of $600 or their actual tax 
liability up to $1,200. Anyone with qualifying children will also 
receive an additional $300 per child. IRS began issuing stimulus 
payments on May 2, 2008.
    The stimulus payments are being estimated using information 
reported on 2007 tax returns, so that individuals can benefit from the 
payments as soon as possible. Individuals who qualify for a larger 
payment as a result of changes between their 2007 and 2008 tax returns 
will receive the additional payment when they file their 2008 return 
(generally between January and April 2009). Individuals who receive 
more than they would have if the payment had been calculated using 
information from their 2008 return will not be asked to pay the excess 
    Due to the time-sensitive nature of these payments, we have been 
advising the IRS of our concerns as soon as we have identified them, to 
allow the IRS to take immediate corrective action when possible. In 
August 2008, we plan to issue the final report of this phase of our 
work on the Internal Revenue Service's (IRS) efforts to implement the 
stimulus payments.
Status of the Stimulus Payment Program:
      The IRS issued approximately 76.5 million stimulus 
payments as of June 13, 2008, totaling approximately $63.9 billion.
      The IRS has made progress on resolving the back-log of 
stimulus-only tax returns. The IRS had processed 94 percent of the 7.7 
million stimulus-only returns received as of June 7, 2008.
      The IRS plans to issue stimulus payments through December 
2008 for those tax returns filed by October 15th.
Audit Status:
    We have reviewed approximately 102.7 million \1\ stimulus payments 
generated from returns processed as of May 30, 2008. We determined that 
theIRS is correctly calculating the stimulus payment for approximately 
99.6 percent of the returns. Correct calculation includes ensuring that 
payments are not issued to individuals without a valid Social Security 
Number, individuals who do not meet gross income and net tax liability 
tests, and individuals who exceed income limitations. However, we have 
identified approximately 385,000 stimulus payments in which our 
calculation of the payment does not agree with the IRS's payment 
calculation.Preliminary review of these payments found that the 
differences resulted from:
    \1\ This figure differs from the number issued by the IRS because 
our review includes payments that have not yet posted to taxpayer 

      Programming that did not include qualified self-
employment losses in the determination of eligibility. The IRS, with 
the Department of the Treasury's concurrence, is using a percentage of 
the self-employment tax reported on Self-Employment Tax (Schedule SE) 
in the computation of the stimulus payment instead of the actual self-
employment income or loss reported on various tax schedules. The IRS 
and the Department of the Treasury indicated they were aware that this 
methodology did not address Profit or Loss from Business (Schedule C) 
and Profit or Loss from Farm (Schedule F) losses. However, the Treasury 
Department chose to use the Schedule SE percentage because it would 
have been too complex to program the payment for every possible self-
employment scenario, given the time available. The Treasury Department 
indicated that the Schedule SE percentage would result in a correct 
payment for most individuals. As of May 30, 2008, TIGTA had identified 
approximately 104,000 returns with approximately $55 million in 
stimulus payments that should not have been paid to individuals with 
Schedule C and Schedule F losses.
      Programming did not include all qualified self-employment 
income in the determination of eligibility. As of May 30, 2008, TIGTA 
had identified approximately 25,000 returns for which the stimulus 
payment was not allowed. In these cases, we believe that taxpayers were 
entitled to an additional $16.5 million. These errors affected clergy 
and other individuals whose income is not subject to the self-
employment tax. TIGTA plans to review the IRS's programming of the 
stimulus payments for Tax Year 2008 to ensure these individuals will 
receive the payments they are entitled to when they file their 2008 
      Taxpayers were not receiving the child portion of the 
stimulus payment because they did not check the Child Tax Credit 
qualifying box on the tax return.When TIGTA raised this concern, the 
IRS initially responded that it could not allow the child portion of 
the stimulus payment in these instances because eligibility for the 
Child Tax Credit could not be determined from the information on the 
tax return. The IRS subsequently announced that it will issue the 
additional child portion of the stimulus payment to approximately 
350,000 households in July. TIGTA is in the process of quantifying the 
number of individuals that might be affected.
Other Items of Interest:
      TIGTA has initiated a review to evaluate the 
effectiveness of the Criminal Investigation (CI) Division's actions to 
prevent the issuance of stimulus payments to individuals whose tax 
returns claimed false income tax refunds or who filed false stimulus-
only returns. To date, we have obtained data extracts to be used in our 
assessment of whether the CI Division implemented controls as indicated 
and whether the controls are functioning as intended. We also plan to 
select samples to determine if the appropriate freeze was placed on 
accounts previously identified as fraudulent to ensure that a stimulus 
payment is not issued and to ensure that controls designed to stop 
stimulus payments for fraudulent returns are working as intended.
      On May 22, 2008, Congress passed H.R. 6081, the ``Heroes 
Earnings Assistance and Relief Tax Act of 2008,'' to amend the Economic 
Stimulus Act of 2008 to allow thousands of military personnel to 
receive a stimulus payment, regardless of whether they or their spouse, 
or their children have a valid Social Security Number.The Joint 
Committee on Taxation estimates that this provision will cost $14 
million in Fiscal Year 2009. It is anticipated that the President will 
sign this legislation. The IRS is currently working on identifying 
affected military personnel. If this legislation is enacted, TIGTA will 
review the IRS's implementation

    Additionally, TIGTA is monitoring the following issues:

      As of June 7, 2008, the IRS identified 246,079 duplicate 
paper-filed stimulus-only returns. These stimulus-only returns were 
filed using the same Social Security Number as another tax return. The 
IRS has consolidated the processing of these returns at its Andover, 
Mass., facility to expedite their processing and minimize the delay in 
issuing the stimulus payment. The IRS has resolved 55,852 of these 
returns. We are in the process of evaluating the procedures for 
forwarding these returns to Andover, as well as the procedures that 
will be used to resolve the duplicate filing conditions. Our review of 
a random sample of50of these returns showed that 39 (78 percent) were 
duplicate returns filed by the same taxpayer, which indicates these 
cases did not involve identity theft. To date, 31 of 50 have had the 
rebate issued. No rebate has been issued for the remaining 19.
      The IRS has determined that between 18,000 and 22,000 
Understanding Your Economic Stimulus Payment Notice (Notice 1378) were 
issued to the wrong individuals. This was the result of a vendor error, 
and the problem has been corrected.
      The IRS identified a programming error that resulted in 
approximately 1,500 payments being directly deposited into the wrong 
individual's bank account. These payments totaled approximately $1.4 
million. The IRS has since corrected the error and is in the process of 
reissuing payments to the entitled individuals. IRS is working with the 
banks to recover the incorrect deposits.
      The IRS reiterated that it will issue a paper stimulus-
only check to anyone who 1) used a Refund Anticipation Loan (RAL), 2) 
split the direct deposit refund among more than one bank account, or 3) 
had tax preparation and other fees deducted from the refund (refund 
anticipation check (RAC)). This process was established to ensure that 
the individual received the stimulus payment instead of the financial 
institution or tax preparer that provided the RAL or RAC. As of April 
17, 2008, 9.9 million taxpayers had used a RAL and 10.3 million had 
used a RAC to receive their refunds. For split refunds, the IRS decided 
to issue a paper check because it did not know which account the 
taxpayer wanted the stimulus payment deposited in. As of June 2, 
approximately 225,867 taxpayers had split their direct deposit refund 
among more than one bank account. Not all of these individuals may 
qualify for an economic stimulus payment.
      IRS officials stated that on May 28, 2008, they had been 
notified by a tax preparation firm that approximately 450,000 tax 
returns had been submitted to the IRS without the RAL indicator. The 
IRS, aided by the firm, was able to identify these accounts before the 
stimulus payments were issued. Payments for these accounts are being 
correctly issued via paper check consistent with IRS's decision to 
issue paper checks on accounts having a RAL. The media incorrectly 
reported that these payments were being deposited into RAL accounts.
      As of May 30, 2008, TIGTA identified approximately 8,800 
individuals (0.15 percent) who filed a stimulus-only return had a 
balance due on their tax accounts. Some of the balance-due conditions 
are the result of IRS input errors or taxpayers entering information on 
the wrong line of their tax return. The IRS is aware of this condition 
and has taken steps to resolve these accounts.
Office of Investigations:
    TIGTA has initiated 12 complaints involving economic stimulus 
payments. The allegations are as follows:

      One case involves an alleged return preparer scheme that 
was reported to IRS-CID in Bogota, Colombia. CID referred the case to 
      Two cases involve allegations of false impersonators 
requesting bank information via the telephone;
      Nine cases involve phishing emails, most of which direct 
victims to follow an Internet link purportedly associated with the 
recipient's economic stimulus refund.

    In closing, I would like to emphasize that TIGTA will continue to 
closely monitor the issuance of the economic stimulus payments and to 
promptly alert the IRS of any problems or emerging issues. Mr. Chairman 
and Members of both Subcommittees, thank you for the opportunity to 
provide TIGTA's assessment of the IRS's implementation of the Economic 
Stimulus Act of 2008. I would be pleased to respond in writing to any 
questions you may have.